A Deeper Dive into a Director’s Duty to Become Informed

Iowa Fiduciary Duty to Become Informed

As described in a prior post (here), Iowa’s fiduciary duty law requires directors to become informed with respect to their decision-making obligations.  Thankfully, a director’s duty to become informed is fairly straightforward.  As you may suspect, the duty to become informed requires a director to become sufficiently familiar with background facts and circumstances relating to a particular issue before taking action.  Not surprisingly, the process typically involves directors reviewing written materials provided before or at a board meeting and paying attention to or participating in the deliberation leading up to a vote on a particular matter.

Further, there is not a specific “legal method” that courts require directors to follow in order to become sufficiently informed; rather, both the method and measure – “how to become informed” and “how much work is required” – are matters of reasonable judgment for the director to exercise and a court to evaluate on a case-by-case basis.  In short, when discharging your duty of care by becoming properly informed on a matter, you may ask yourself, would a judge or jury of my peers reviewing my actions believe I’ve become sufficiently informed by (1) reviewing the materials presented; (2) obtaining answers to questions that may arise; and (3) otherwise doing the work necessary to thoroughly understand a matter before taking action?  While these items are fairly basic, many directors overlook these responsibilities and find themselves on the wrong end of a costly lawsuit.

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About Matthew McKinney

Attorney focused on civil and commercial litigation.
This entry was posted in Business Owner, Director and tagged , , , , . Bookmark the permalink.

One Response to A Deeper Dive into a Director’s Duty to Become Informed

  1. Pingback: Care, or Beware! Iowa’s Fiduciary Duty of Care | Business and Corporate Disputes

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