Abstract

This paper is based on a keynote address to the 2006 annual workshop of the Australian Corporate Law Teachers' Association on "The Pathology of Corporate Law." The paper's thesis is that fuller understanding of many corporate malfunctions requires examination of organizational structures and patterns of interaction below the level of the board within a corporation's hierarchy. The paper argues that there is merit to mandating duties of skill and care at the executive level, drawing on examples of executive conduct in recent corporate fiascos. The paper also explores the application of the business judgment rule to officers. As conventionally formulated, the rule's prototypical subject appears to be a board of directors that, exercising original and undelegated power, makes discrete decisions about particular transactions or other matters. The paper questions the rule's applicability to the work done by officers, many of whom may be appointed on the basis of a reasonable belief that they will diligently bring relevant skills to bear in an ordinarily careful manner.