The Failures of the Duty of Care Exposed by the Subprime Mortgage Crisis

Revue Droit & Affaires [Business & Law Review], 12th edition (2015)

13 Pages Posted: 24 Dec 2015 Last revised: 4 Mar 2016

See all articles by Julien Koch

Julien Koch

Vivien & Associés (Paris)

Date Written: October 14, 2015

Abstract

English Abstract: Legal scholars have been debating the benefits of directors and officers’ liability regimes, a classic theme in corporate law. Decisions from United States and German courts cast doubt on the effectiveness of such liability regimes. Courts in these jurisdictions have faced similar cases of oversight failure. Banks employees invested excessively in complex and risky financial products, which in turn caused massive losses to their companies. In the United States, banks’ directors and officers were not punished for their lack of oversight, whereas in Germany these actors were held liable. Differences in approach between the United States and Germany lead to question the effectiveness of the duty of care to fulfill its goals.

French Abstract: La responsabilité des dirigeants est un thème classique attirant les réflexions et commentaires des plus éminents spécialistes du droit des sociétés. Certaines décisions de tribunaux américains et allemands semblent pourtant mettre en exergue les limites des régimes de responsabilité civile des dirigeants. Ces tribunaux ont eu à trancher des affaires similaires, où certains salariés de banques ont provoqué des pertes massives en investissant dans des produits financiers complexes. Si aux Etats-Unis, aucune responsabilité civile ne fut retenue à l'encontre des dirigeants de grandes banques pour leur défaut de contrôle effectif, la situation opposée a été constatée en Allemagne. Cet exemple croisé entre les jurisprudences antinomiques américaine et allemande conduit à douter de l'efficacité des régimes de responsabilité civile des dirigeants à parfaitement remplir leurs objectifs.

Keywords: Comparative law, Corporate governance, Regulation, Financial crisis, Crise financière, Liability, Responsabilité, Delaware, Fiduciary duties, Business judgement rule, oversight duty, Caremark doctrine, risk monitoring, risky financial products, CDO, securitization, director, officer, dirigeants

Suggested Citation

Koch, Julien, The Failures of the Duty of Care Exposed by the Subprime Mortgage Crisis (October 14, 2015). Revue Droit & Affaires [Business & Law Review], 12th edition (2015). Available at SSRN: https://ssrn.com/abstract=2699127

Julien Koch (Contact Author)

Vivien & Associés (Paris) ( email )

3 rue de Monttessuy
Paris, 75007
France
+33699022150 (Phone)

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