Discuss the duties of care and good faith.

Question

What will be an ideal response?

Answer 1

The duty of care involves the exercise of reasonable care by a board member to ensure that the corporate executives with whom she or he works carry out their management responsibilities and comply with the law in the best interests of the corporation. Directors are permitted to rely on information and opinions only if they are prepared or presented by corporate officers, employees, a board committee, or other professionals the director believes to be reliable and competent in the matters presented. Board members are also directed to use their "business judgment as prudent caretakers": the director is expected to be disinterested and reasonably informed, and to rationally believe the decisions made are in the firm's best interest. Ultimately, it indicates that a director does not need to be an expert or actually run the company.
The duty of good faith is one of obedience, which requires board members to be faithful to the organization's mission. In other words, they are not permitted to act in a way that is inconsistent with the central goals of the organization. Their decisions must always be in line with organizational purposes and direction, strive towards corporate objectives, and avoid taking the organization in any other direction.