Status Bound: The Twentieth Century Evolution of Directors’ Liability

This article examines scholarly debates and judicial decisions, ranging from the turn of the twentieth century to its end, about the appropriate status of directors and the standard of liability that each status carried—specifically in situations involving allegations of breaches of the duty of care. I argue that during the course of the twentieth century, jurists moved from viewing directors as trustees, to describing directors as representatives of the shareholders, to holding that directors were mere agents of shareholders who typically served as passive principals. Each of these descriptions corresponded to a particular understanding of the role of corporations in society, and each implied a particular standard of liability—when directors were viewed as trustees they were subjected to heightened requirements, directors as representatives were expected to act reasonably, while the decisions of directors as agents were subjected only to minimal scrutiny