A Proposal to Eliminate Director Standards From the Model Business Corporation Act

Abstract

The Committee on Corporate Laws of the Business Section of the American Bar Association recently adopted amendments to the section of the Model Business Corporation Act (MBCA) enunciating standards of director performance. In place of the current section 8.30, which has been adopted by 42 states, the Committee has adopted two sections - one defining a "standard of conduct" and one defining a "standard of liability" for corporate directors. This paper argues that these new standards do not achieve the goals of bifurcation. Moreover, if adopted and used, the new standards will engender confusion and possibly inequitable results. This paper proposes the removal of standards governing the duty of care from the MBCA, returning authority over this area of law to the common law courts.