Serving on the Board of Directors of any corporation can be a great opportunity for both personal and financial growth. As with everything in life, however, in order to receive, one must also give. This article will summarize the responsibilities imposed by the law on directors who serve in the state of Florida. The law to which we will be referring is judicial common law and Florida Statutes. Specifically, we will examine Florida Statutes Sections 607.0801 through 607.0832, which are the sections of the Florida Business Corporation Act that address boards of directors. These sources of obligation are in addition to the articles of incorporation and bylaws specific and unique to each corporation, which often supersede the base standards set by statute. If the directors fulfill their duties, they will be protected from personal liability for negative consequences of their decisions by the business judgment rule. A convenient way to organize the obligations imposed by these sources of law is according to the three broadly defined duties of directors: the Duty of Good Faith, the Duty of Care, and the Duty of Loyalty.
The Duty to Act in Good Faith
Good faith and fair dealing mean what they sound like they mean. This duty imposes more than the default standard of care that we owe to everyone around us. Because of the unique nature of the board of directors, especially considering their relationship to the corporation and the power they wield over the company’s long term viability, they are held to a higher standard. This duty is perhaps best understood in terms of what is notgood faith. The Florida Supreme Court examined good faith in the context of the duties of an insurer to an insured. Berges v. Infinity Ins. Co., 896 So. 2d 665, (Fla. 2004). There, the Court found that “good faith” involved exercising care in the handling of the claim, including investigating and disclosing reasonable settlement offers to the insured. In the same way, boards of directors will be expected to act reasonably in investigating consequences of decisions and alternatives before making a final plan. This duty can be understood as being distinct from the other duties because it applies to interactions between the board and the corporation, whereas the other two duties deal with the board’s internal procedures and the board’s interactions with those outside the corporation….
Source: Important Things to Know When Serving on a Board of Directors