178 InManagersWeTrust
material information that is reasonably available to them. Informed
directors then must act prudently and reasonably in the discharge
of their duties. The liability of directors for breach of the duty of
care in most circumstances requires a finding by a court that the
directors were grossly negligent—quite a high standard that is akin
to driving while intoxicated. The duty of loyalty requires directors to
subordinate their personal interests to those of the corporation if a
conflict exists. Specific applications of this general duty vary among
economically-developed countries, but the variation is not much
more pronounced than are the nuanced differences between states
within the United States.
The differences are thus more subtle between U.S./U.K. and
Continental Europe director duties than is often recognized. The
varying prescriptions address the content of those duties rather than
their discrete beneficiaries. They are “vertical,” intended to preserve
and expand the size of the corporate pie rather than address how it
is sliced or allocated.
When the question is pie size, the interests of managers are pit-
ted against the interests of all the other constituencies, and so it is
not surprising that these vertical mechanisms differ little across the
borders of economically advanced countries. What is surprising is
that they also extend to situations where allocation is at stake, a
“horizontal” question that manifests itself most acutely when threats
to corporate control arise.
Most U.S. state laws impose either a heightened standard of duty
on directors facing hostile takeovers or a heightened standard of
judicial review of director conduct. The issue in either instance is
whether the directors have acted in the best interest of shareholders.
While these heightened standards do not exist in German law, which
only requires directors not to act contrary to the stockholders’ in-
terest and to show regard for the common interest, this does not
mean that the heightened U.S. standard separates the American
model from the Continental model.
Many states empower directors to consider the interests of non-
shareholder constituencies in numerous circumstances. For exam-
ple, although U.S. judges often remar kthat “shareholders come
first,” they simultaneously let directors consider the impact of cor-
porate decisions on constituencies other than shareholders, includ-
ing creditors, customers, employees, and sometimes as broad a group
as the general community.
Judges sometimes mesh mandatory rhetoric with discretionary