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Directorial Activism In The Face Of Alleged Or Actual Officer Misbehavior

Harvey L. Pitt | March 30, 2004

Ffor at least a century, the role of non-management corporate directors was often treated as one of passivity, not activism. Power to manage a corporation's affairs was believed to reside exclusively in the hands of its senior officers, with the proper role of outside directors being generically and non-intrusively to oversee, and approve (when asked to do so), significant managerial decisions.

This misperception of an outside director's proper role was fostered by several factors:

  • Selecting outside directors was seen as a CEO perk;
  • Good corporate leaders were perceived as focused and effective, and also absolute monarchs;
  • Outside directors lacked effective resources to obtain their own guidance and assistance;
  • No...
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