A letter by Professor Ronald J. Colombo was published in Newsday on February 19, 2009.
Where’s the sense of duty?
By Ronald. J. Colombo
Members of Congress have heaped a fair amount of blame and criticism upon corporate America over the past few months, culminating in seven hours of chastisement when the CEOs of America’s top banks were called to testify before the House Financial Services Committee [“Execs get an earful,” News. Feb. 12]..
The criticism is just, insofar as corporate officers, and corporate directors, owe a fiduciary duty of care to the corporation and its shareholders.
As commonly articulated, this duty obliges officers and directors to discharge their corporate responsibilities with the degree of skill and diligence that a reasonably prudent person would exercise over his or her own personal affairs.
Sadly, it appears as though many corporate officers and directors fell short of this standard.
But Congress’ criticism is also most hypocritical. For as Sen. Frank Lautenberg (D-N.J.) frankly admitted, neither he nor any of his colleagues were likely to read the entire version of the $790-billion stimulus bill before voting upon it.
Were Lautenberg and his colleagues corporate directors and officers, shareholders would have a prima facie case against them for breaching their duty of care. Aiding and abetting this breach was a congressional leadership and an administration that demanded a vote on the bill before anyone could fairly review – let alone digest – it.
I had audaciously hoped that our government would have learned a thing or two about the duty of care from last the CEO’s lengthy testimony, and from the travails of corporate America over the past year. Sadly, that does not appear to be the case.