Keith Paul Bishop asks "May A Director Properly Rely On Her Rabbi?":
In prescribing the duties of directors, California Corporations Code Section 309 provides that a director is entitled to rely on information, opinions, reports or statements prepared or presented by "counsel, independent accountants or other persons as to matters which the director believes to be within such person's professional or expert competence". While the statute makes no reference to religious authorities, it would appear to allow a director to rely on such persons so long as the director believes the matters were within their professional or expert competence. For example, a director of a corporation that prepares kosher food might rely on a rabbi as to matters pertaining to kashrut.
DGCL section 141(e) is comparable, specifically providing that a director is "fully protected" by relying on such a person. Which made me wonder whether a director could get protection for replying in good faith on an astrologer or psychic provided the director believes the matter is within their professional expertise.
Perhaps surprisingly (or perhaps not), I was unable to find an caselaw on point. I did find a law review article, however, which opined:
When the argument focuses on valuation and management hires well credentialed investment bankers, it is difficult to see how a court can “look behind” competently prepared valuations.114 Judges and commentators acknowledge that investment bankers make biased valuations with disconcerting frequency, but no one credibly suggests preferable alternative experts.
114 For a partial but quite useful summary of the problems and indeterminacies that investment bankers face in preparing fairness opinions, see Carney, supra note 41, at 533-35. For clear expression of the court's inability to second-guess substance as opposed to procedure, see, e.g., the PLI's 21st Annual Institution on Securities Regulation, supra note 34. In one colloquy, E. Norman Veasey, now Chief Justice of the Delaware Supreme Court, suggested that the board should “look behind what the (investment) bankers are telling it.” Moore et al., supra note 34, at 279. To Veasey's suggestion, practitioner Steven Volk replied that all a director could do is “to satisfy himself that this is a reputable banker of national repute,” and stressed that beyond that inquiry the director could only “go to a different discipline, he could hire an astrologer or some other mystic to cross-check the results.” Id. at 280. See also, Panel Discussion, supra note 40, at 601 (noted practitioner, Arthur Fleischer, responding to calls for investment banking standards of conduct by stating that he was “not clear on what (the proponent was) talking about” and that “(t)he key fact for the banker is to act sensibly: that is it, and there is not anything more.”) (emphasis added). See also id. (Panelists “had an argument in the hall after the first panel about what the word 'fair' means in these (fairness) letters, and we had no real agreement within the group.”).
Park McGinty, The Twilight of Fiduciary Duties: On the Need for Shareholder Self-Help in an Age of Formalistic Proceduralism, 46 Emory L.J. 163 (1997).
