So, You Are a Corporate Director, Now What? The Duties, Rights, and Protections of a Corporate Director

This guide was originally published on March 4, 2022, and has been updated as of June 26, 2026.

At a Glance

This guide provides a high-level summary of the duties, obligations, rights, and protections central to the role of a corporate board member under Delaware law. Although this guide focuses on Delaware law, a director who is able to comply with Delaware’s standards likely will avoid liability for breaches of fiduciary duties under most state corporate laws. That is because Delaware has a more developed body of case law with respect to corporate governance issues; therefore, many other states look to Delaware law for precedent.

What Are My Duties?

In managing and controlling a company’s business and affairs, directors and officers of a Delaware corporation owe simultaneous fiduciary obligations to act with due care and loyalty to the corporation and its stockholders. Delaware case law recognizes that those fiduciary duties include obligations to act on an informed basis, disclose material information and conflicts when required, deal candidly with fellow directors, and exercise good-faith, board-level oversight.

Duty of Care

• Directors must act on an informed basis and consider all material information that is reasonably available.
• Meeting this obligation requires having reasonable knowledge of their company’s business, obtaining credible information with respect to corporate actions, and anticipating and understanding the consequences of each decision or transaction.
• Directors may rely on competent information provided by others, such as officers, employees, counsel, committees, or other persons, if the directors have no reason to believe that the information is unreliable or incompetent.
  • A director cannot delegate the director’s final board authority to others.
• A duty of care claim can generally only be successful against directors if their actions are proven by the plaintiff to be “grossly negligent.”
  • Simply claiming that the director “made a bad business decision” is not enough to accuse them of failing their duty of care.

**Note: Directors should still create a record showing that they reviewed material information, asked questions, considered alternatives, and relied on appropriate advisors in making their decisions.

Duty of Loyalty

• To satisfy the duty of loyalty a director must act:
  • In good faith.
    • A director acts in bad faith by intentionally placing personal interests ahead of the corporation’s interests, intentionally causing the corporation to violate the law, consciously disregarding a known duty to act, or knowingly failing to address serious red flags.
  • With an honest belief that a specific transaction, strategy, or course of action is in the best interests of the company and its stockholders.
  • On a disinterested and independent basis.
  • Without condoning or engaging in conduct such as unlawful harassment.
• A common example of a breach of the duty of loyalty occurs in self-dealing transactions. This is when the director is involved on both sides of the deal or personally benefits from the deal in a way that is not shared with all stockholders.
  • In a similar vein, under the Corporate Opportunities Doctrine, if a director is presented with a business opportunity that the corporation is financially able to pursue and in which the corporation has an interest or expectancy, the director is prohibited from “usurping” the opportunity for the director’s own use.
• It is worth noting that a director can have interest and lack independence without being disloyal. That said, Delaware courts scrutinize transactions involving questions of interest and independence. Deference, however, is given to decisions made by a majority of disinterested and independent directors..

Duty to Disclose

• In circumstances where a director has interest or lacks independence, the director must promptly disclose to the board the details that might raise doubt about the director’s disinterestedness and independence.
• A corporation’s board of directors also must disclose fully and fairly all material facts within the board’s control. A fact is material if:
  • It would have been viewed by a reasonable investor as having significantly altered the total mix of information available.
  • There is substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.

Duty of Oversight

• The duty of oversight requires directors to:
  • Institute a system of board-level reporting and controls designed to flag, for the board, any potential problems with the company’s operational viability, legal compliance, and financial performance.
  • Ensure that the system operates as intended, by making directors aware of matters requiring their attention.
  • Act with good faith to address red flags.
  • Not act with bad faith by consciously ignoring red flags or issues regarding compliance with laws, regulations, or corporate protocol.
• Although the responsibility cannot be delegated, aspects of the duty of oversight can be accomplished by developing board committees, such as compliance or finance, or tasking certain officers with reporting obligations.

**ESG — Directors of a Delaware corporation are NOT prohibited from considering the interests of other stakeholders — such as the environment, general society, employees, or the communities in which the company conducts business — in making decisions and exercising their oversight roles.

• That said, it must be reasonably conceivable that the transaction or corporate strategy pursued is in the corporation’s best interest over the time horizon being determined by the board to be appropriate for achieving the corporation’s goals.

What Should I Keep in Mind?

Generally, a director seeking to satisfy fiduciary duties should keep the following issues in mind.

1. What information do I need to see and consider to make an independent, disinterested, informed, and good-faith decision?
2. Are there any conflicts or competence concerns including as it relates to advisors and other agents?
3. What is a reasonable and appropriate process for analyzing and making decisions about the transaction or issues being considered?

How Will My Actions Be Reviewed?

If a company’s board considers and acts in accordance with the duties (and questions) detailed above, courts reviewing the board’s conduct will apply the business judgment rule.

• A core feature of the business judgment rule is the rebuttable presumption that directors acted after informing themselves, in good faith, and in the honest belief that the action taken was in the corporation’s best interest.
• Directors are protected from liability for acting with a rational business purpose.
• To rebut the presumptions afforded by the business judgment rule, a plaintiff must provide evidence that the directors were grossly negligent, acted in bad faith, or were motivated by interests other than those of the company and its stockholders.

Do I Have Any Protections if Sued?

Given the interest in attracting talented, experienced, and diligent individuals to serve as directors of Delaware companies, Delaware law seeks to reduce the burden on corporate directors to satisfy their fiduciary duties while limiting the consequences of a breach by disinterested, well-informed directors acting in good faith.

• Reliance on the company and its agents. A director is permitted to rely, in good faith, on the records of the corporation. A director also may rely, in good faith, on information and materials presented to the board by the company’s officers, employees, board committees, or by vendors, who were selected with reasonable care and have sufficient professional competence.
• Possible exemption for monetary liability for certain breaches. A Delaware corporation, under Section 102(b)(7) of the Delaware General Corporation Law, may include a charter provision limiting or eliminating personal monetary liability for certain fiduciary duty claims, including many duty of care claims, against directors, and in some circumstances, officers.
  • Exculpation does not protect directors from claims for breach of the duty of loyalty, bad faith, intentional misconduct, knowing violations of law, unlawful dividends or stock repurchases, or transactions involving improper personal benefit.
  • Officer exculpation is narrower than director exculpation and does not protect officers from claims for breach of the duty of loyalty, bad faith, intentional misconduct, knowing violations of law, transactions involving improper personal benefit, or claims brought by and in the right of the corporation.
  • Officer exculpation also only applies to covered officers, generally including the president, CEO, COO, CFO, chief legal officer, controller, treasurer, chief accounting officer, and certain named executive officers.
• Indemnification and expense advancement. Section 145 of the Delaware General Corporation Law permits corporations to protect present and former directors and officers from expenses incurred in connection with threatened, pending, or completed litigation arising from actions taken in service to the company or at the company’s direction. You should determine what indemnification and advancement rights you have as a director by checking the certificate of incorporation, bylaws, and other agreements.

**Note: There is a safe harbor to the rule against a director’s usurpation of corporate opportunities. Under that approach, the director should formally present any business opportunity they are contemplating (and that is related to the corporation’s current or prospective activities) to the board. If a disinterested board rejects the opportunity after it was formally presented to them, the director would be discharged of their fiduciary obligation regarding the pursuit of that opportunity.