Good faith & oversight

Question 1

What is the duty of good faith?

Answer 1

directors must make a good faith effort to exercise their duty of care in overseeing the corporation’s business

Question 2

What is the Caremark test?

Answer 2

For a director to be liable for a breach of the duty of oversight
1) Directors failed to implement any reporting or information system
2) Directors failed to monitor or oversee operations and didn’t react to red flags.

Question 3

Standards created in Allis-Chambers

Answer 3

1) employees are assumed to have integrity and to be doing their job until a “red flag” leads you to believe otherwise
2)directors are entitled to rely on the honesty & integrity of their subordinates until something occurs to put them on suspicion that something is wrong