{
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 "@type": "DefinedTerm",
 "@id": "https://wulfkaal.github.io/entities/director-liability",
 "identifier": "kaal:entity:director-liability",
 "name": "Director liability",
 "termCode": "director-liability",
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 "author": {
  "@type": "Person",
  "name": "Wulf A. Kaal",
  "identifier": "https://orcid.org/0000-0003-0757-275X"
 },
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   "value": [
    "2010",
    "2013"
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 "subjectOf": [
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1558614-006",
   "identifier": "kaal:claim:1558614-006",
   "text": "Although the business judgment rule is articulated differently in the two countries and German law leaves somewhat more room to challenge risky decisions, in both the United States and Germany the rule is highly protective of corporate managers.",
   "abstract": "the business judgment rule is articulated differently in the United States and in Germany, and there may be more latitude to challenge some risky decisions in Germany, but in both countries the rule is highly protective of corporate managers",
   "citation": "Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614",
   "datePublished": "2010",
   "claim_type": "empirical",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [],
   "source_pdf_sha256": "e898211630f4116879329d6de8397523dca5b066864147421aa5cbc7429dc83b",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1558614-023",
   "identifier": "kaal:claim:1558614-023",
   "text": "Because U.S. law frames the inquiry around corporate waste, and most risk taking does not meet the waste standard, showing that a decision was hazardous or excessively risky is not enough to rebut the business judgment rule in the United States.",
   "abstract": "Because most risk taking does not meet the definition of corporate waste, a showing of hazard or excessive risk is insufficient to rebut the 98 business judgment rule in the United States.",
   "citation": "Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614",
   "datePublished": "2010",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "U.S. courts presume absence of corporate waste and ask only whether that presumption is rebutted"
   ],
   "source_pdf_sha256": "e898211630f4116879329d6de8397523dca5b066864147421aa5cbc7429dc83b",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1558614-025",
   "identifier": "kaal:claim:1558614-025",
   "text": "The U.S. requirement that directors act on an informed basis is watered down because many states permit charter provisions exculpating directors from liability for breach of the duty of care, including the duty to act on an informed basis.",
   "abstract": "This requirement, however, is watered down in the United States by many states that allow corporations to adopt charter provisions that exculpate the directors from liability to the corporation for breach of a duty of care",
   "citation": "Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614",
   "datePublished": "2010",
   "claim_type": "failure",
   "confidence": "evidenced",
   "is_failure_mode": true,
   "scope_conditions": [
    "states with exculpation statutes such as Delaware, Illinois and New Jersey"
   ],
   "source_pdf_sha256": "e898211630f4116879329d6de8397523dca5b066864147421aa5cbc7429dc83b",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1558614-032",
   "identifier": "kaal:claim:1558614-032",
   "text": "In the United States the duty to disclose risk indirectly generates risk monitoring, because directors who know they are responsible for disclosing risk have reason to monitor it even though corporate law imposes no explicit duty to monitor.",
   "abstract": "Directors thus may monitor for risk because they know they are responsible for dis- closing it.",
   "citation": "Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614",
   "datePublished": "2010",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "risk must be of a kind that securities law requires to be disclosed"
   ],
   "source_pdf_sha256": "e898211630f4116879329d6de8397523dca5b066864147421aa5cbc7429dc83b",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1558614-039",
   "identifier": "kaal:claim:1558614-039",
   "text": "Delaware courts have not explicitly imposed a duty to monitor risk, but that omission may be moot: because failing to disclose risk violates federal securities law, unmonitored risk is likely to become undisclosed risk and therefore actionable.",
   "abstract": "In the United States, Delaware courts have not explicitly im- posed a duty to monitor risk. Because failure to disclose risk is a vi- olation of federal securities laws, however, this may be a moot point. Unmonitored risk is likely to be undisclosed risk.",
   "citation": "Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614",
   "datePublished": "2010",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "risk of a kind that federal securities law requires to be disclosed"
   ],
   "source_pdf_sha256": "e898211630f4116879329d6de8397523dca5b066864147421aa5cbc7429dc83b",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2317580-002",
   "identifier": "kaal:claim:2317580-002",
   "text": "The liability standard for breach of fiduciary duty is set so high that courts rarely find directors in violation, because only a board's sustained or systematic failure to exercise oversight can produce liability.",
   "abstract": "The standard for liability is so high that it is hard for courts to find directors in violation of their fiduciary duties.2 Only a board's sustained or systematic failure to exercise oversight can result in liability.",
   "citation": "Wulf A. Kaal, Elizabeth R. Malay, The Role of Corporate Integrity Agreements in the Expansion of Fiduciary Duties (2013). SSRN: https://ssrn.com/abstract=2317580",
   "datePublished": "2013",
   "claim_type": "failure",
   "confidence": "evidenced",
   "is_failure_mode": true,
   "scope_conditions": [
    "director oversight liability under Caremark and its progeny"
   ],
   "source_pdf_sha256": "50973e1e820aef47a4e7ffdbdcb513d03f1845643fcf4fa5910e9528a0b7dac2",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2317580-005",
   "identifier": "kaal:claim:2317580-005",
   "text": "Because directors contractually agree to increase compliance through an open door policy for the government, CIAs substantially raise the liability risk for companies whose directors did not act in accordance with their fiduciary responsibilities.",
   "abstract": "Because the directors contractually agree to increase compliance by way of an open door policy for the government,10 CIAs can substantially increase the risk of liability for companies whose directors did not act in accordance with their fiduciary responsibilities.",
   "citation": "Wulf A. Kaal, Elizabeth R. Malay, The Role of Corporate Integrity Agreements in the Expansion of Fiduciary Duties (2013). SSRN: https://ssrn.com/abstract=2317580",
   "datePublished": "2013",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "a CIA has been executed",
    "directors granted the government access, including site visits"
   ],
   "source_pdf_sha256": "50973e1e820aef47a4e7ffdbdcb513d03f1845643fcf4fa5910e9528a0b7dac2",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2317580-033",
   "identifier": "kaal:claim:2317580-033",
   "text": "In re Pfizer stipulates that for a company that executed a CIA the court will allow an assumption that the directors were fully informed and therefore willing participants in the corporate malfeasance, so that the CIAs themselves became the court's proof that the directors could have breached their fiduciary duties.",
   "abstract": "The court stipulates that in the case of a company that executed a CIA, it will allow an assumption that the directors were fully informed, and thus, willing participants in the corporate malfeasance.",
   "citation": "Wulf A. Kaal, Elizabeth R. Malay, The Role of Corporate Integrity Agreements in the Expansion of Fiduciary Duties (2013). SSRN: https://ssrn.com/abstract=2317580",
   "datePublished": "2013",
   "claim_type": "mechanism",
   "confidence": "evidenced",
   "is_failure_mode": false,
   "scope_conditions": [
    "In re Pfizer, 722 F. Supp. 2d 453 (S.D.N.Y. 2010)",
    "boards obligated by prior CIAs to monitor the very conduct alleged"
   ],
   "source_pdf_sha256": "50973e1e820aef47a4e7ffdbdcb513d03f1845643fcf4fa5910e9528a0b7dac2",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2317580-035",
   "identifier": "kaal:claim:2317580-035",
   "text": "Courts assume that the boards of companies that executed a CIA have more knowledge and can exercise more control, and therefore hold those directors to a heightened fiduciary duty, rejecting directors' claims of ignorance because executing a CIA or a CIA like agreement means directors do know or should know about the noncompliance.",
   "abstract": "To summarize, courts assume that the boards of companies that executed a CIA have more knowledge and can exercise more control and should thus act with a heightened fiduciary duty. Directors are held to a higher standard if the company executed a CIA.",
   "citation": "Wulf A. Kaal, Elizabeth R. Malay, The Role of Corporate Integrity Agreements in the Expansion of Fiduciary Duties (2013). SSRN: https://ssrn.com/abstract=2317580",
   "datePublished": "2013",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "companies that executed a CIA or a comparable agreement such as a voluntary compliance plan"
   ],
   "source_pdf_sha256": "50973e1e820aef47a4e7ffdbdcb513d03f1845643fcf4fa5910e9528a0b7dac2",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-001",
   "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-001",
   "text": "The nearly insurmountable standard for liability in oversight cases in the United States undermines the signalling of the expected standard of conduct, and this could have long-term implications for American corporate law.",
   "abstract": "The nearly insurmountable standard for liability in oversight cases and its effect on signalling the expected standard of conduct could have long-term implications for corporate law in the United States.",
   "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)",
   "datePublished": "2013",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "United States, Delaware corporate law",
    "oversight or duty to monitor claims"
   ],
   "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-005",
   "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-005",
   "text": "Under Delaware law as applied in In re Citigroup, directors' incorrect evaluation of business risk and their inability to predict the future do not violate the duty of oversight, so the Caremark duty to monitor is not extended to business risk.",
   "abstract": "According to the Delaware Chancery court, directors' incorrect evaluation of business risk and their inability to predict the future did not violate directors' duty of oversight.",
   "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)",
   "datePublished": "2013",
   "claim_type": "empirical",
   "confidence": "evidenced",
   "is_failure_mode": false,
   "scope_conditions": [
    "Delaware law",
    "claims framed as failures to monitor business risk"
   ],
   "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-006",
   "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-006",
   "text": "Losses alone are not sufficient to hold directors personally liable for taking risks that lead to those losses, because risk is inherent in maximizing shareholder value.",
   "abstract": "Losses alone were not sufficient to hold directors personally liable for taking risks that lead to losses because risk is inherent in maximizing shareholder value.",
   "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)",
   "datePublished": "2013",
   "claim_type": "condition",
   "confidence": "evidenced",
   "is_failure_mode": false,
   "scope_conditions": [
    "Delaware law",
    "risk taking that produces corporate losses"
   ],
   "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-010",
   "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-010",
   "text": "Directors who are inadequately informed about the expected standard of conduct will underestimate their personal liability exposure and engage in riskier behavior than is desirable for the company itself.",
   "abstract": "Inadequately informed directors may underestimate their personal liability exposure and engage in more risky behavior than is desirable for the company itself.",
   "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)",
   "datePublished": "2013",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "directors depend on counsel for fiduciary duty guidance"
   ],
   "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-012",
   "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-012",
   "text": "Under German law, directors' business decisions lose the protection of the business judgment rule where the business risk taken was inappropriately excessive, a standard German courts announced in ARAG/Garmenbeck.",
   "abstract": "explained that if the \"business risk was inappropriately excessive,\" directors' business decisions are not protected under the 23 German business judgment rule.",
   "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)",
   "datePublished": "2013",
   "claim_type": "condition",
   "confidence": "evidenced",
   "is_failure_mode": false,
   "scope_conditions": [
    "German stock corporation law",
    "Section 93 AktG business judgment rule"
   ],
   "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-013",
   "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-013",
   "text": "German commentators, whose expertise German courts rely on heavily, concluded after the financial crisis that managers do not act reasonably under the German business judgment rule if the risks they take on behalf of the corporation result in the demise of the corporation.",
   "abstract": "German commentators (contrary to their counterparts in the United States, German courts rely heavily on the expertise of commentators) concluded that managers do not act reasonably in terms of the German business judgment rule if risks",
   "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)",
   "datePublished": "2013",
   "claim_type": "empirical",
   "confidence": "evidenced",
   "is_failure_mode": false,
   "scope_conditions": [
    "Germany",
    "post financial crisis evaluation of liability rules"
   ],
   "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-017",
   "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-017",
   "text": "Despite the limits of the comparison, had In re Citigroup and Disney been decided in Germany the allocation of liability would have been different, because German courts are generally more willing than Delaware courts to second-guess directors' decisions.",
   "abstract": "it seems difficult to escape the conclusion that had the two American cases, In re Citigroup and Disney, been decided in Germany, the liability allocation would have been different. German courts generally seem more willing to second-guess directors' decisions than Delaware courts.",
   "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)",
   "datePublished": "2013",
   "claim_type": "empirical",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "cases involving extreme facts at the cusp of culpable conduct"
   ],
   "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-020",
   "identifier": "kaal:claim:kaal-2013-acomparativeperspectiveo-020",
   "text": "If the liability standard were lowered, directors and officers would take their increased personal liability exposure into account and could be incentivized to engage in less risky behavior.",
   "abstract": "Directors and officers would take their increased personal liability exposure into account and could be incentivized to engage in less risky behavior.",
   "citation": "Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)",
   "datePublished": "2013",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "a moderate liability standard for oversight breaches is adopted"
   ],
   "source_pdf_sha256": "ac5c955fe01209c54c78c4575c0b8bf570e5f1259c3f855510697cf51a32e59a",
   "status": "current"
  }
 ],
 "description": "17 claims in the published works of Wulf A. Kaal carry the concept tag 'director-liability'. Derived node: a roster, not an adjudicated definition."
}