Breaching the Accountability Firewall: Market Norms and the Reasonable Director

Abstract

This Article examines and evaluates the role of market norms in determining whether directors have acted reasonably and the appropriateness of setting a standard of reasonableness that reflects market norms. It argues that although there are situations in which a standard that reflects market norms may not be appropriate for determining the reasonableness of a director’s conduct, it is the best standard more often than not. While this Article focuses on the U.K. director’s duty of care, the question of whether compliance with market norms should be exculpatory arises every time legal or regulatory enforcement depends upon establishing that a market actor has acted unreasonably.

Keywords: Director's duty of care and skill, market norms, regulation, financial crisis, reasonableness, financial services

JEL Classification: K20, K22, K29