In an earlier post, prompted by a post by Dutch law professor Bastiaan F. Assink on tort liability of directors of Dutch corporations, I noted that, in US agency law:
... a director acting alone and qua director is not an agent of the corporation. See Restatement (Second) of Agency § 14C (1958) (an individual director is not an agent of the corporation or its shareholders); Arnold v. Soc'y for Sav. Bancorp, 678 A.2d 533, 539-40 (Del.1996) (“Directors, in the ordinary course of their service as directors, do not act as agents of the corporation ... A board of directors, in fulfilling its fiduciary duty, controls the corporation, not vice versa.”).
In response, Bastiaan updated his post to inform us that, among other things, under Dutch law "the board as well as individual board members have the power to act on behalf of the corporation, unless the articles of association provide otherwise." I take that observation to mean that, under Dutch law, an individual director is an actual agent of the corporation.
The US doctrine that a director, acting alone, is not an agent of the corporation follows conceptually from the notion that the board of directors, acting collectively, is the embodiment of the corporate principal. I explored the policy rationale behind that rule in my article Why a Board?, in which I noted that:
Acting alone, an individual director “has no power of his own to act on the corporation’s behalf, but only as one of a body of directors acting as a board.” Moreover, as the MBCA puts it, “directors may act only at a meeting unless otherwise expressly authorized by statute.”
Why this emphasis on collective rather than individual action? The MBCA’s drafters offer the following answer: “The underlying theory is that the consultation and exchange of views is an integral part of the functioning of the board.” Or, as Forbes and Milliken opine, “the very existence of the board as an institution is rooted in the wise belief that the effective oversight of an organization exceeds the capabilities of any individual and that collective knowledge and deliberation are better suited to this task.” These arguments run afoul of the old joke that a camel is a horse designed by a committee, but they find considerable support in the literature on individual versus group decision making.
I wonder what the origins of the seemingly contrary Dutch rule were and what policy rationale is understood as explaining that rule.
