The Ever-Expanding Horizon of Directors’ and Officers’ Duties

When two of Boeing’s 737 Max aircraft crashed within five months of each other, resulting in the deaths of 346 people, shareholders filed a suit against the directors for breach of duties. The Delaware court noted, while safety was “essential and mission critical” to Boeing’s business, there was no board committee assigned the specific task of overseeing airplane safety. Turning to Australia, when Storm Financial collapsed, many clients, the majority of whom were retirees or nearing retirement, suffered massive financial losses. With little or no prospect of rebuilding their financial position, these clients lost their investments, their homes and their life savings, and still had significant debts outstanding. In a case instituted by Australian Securities and Investments Commission, the Federal Court of Australia decided that the company’s former directors, the Cassimatis couple, breached their directors’ duties when they caused the company to violate certain provisions of the law that could lead to its collapse. The core mission of Storm Financial was to provide financial planning and investment services to its clients, whereas the advice the company provided to those investors was inappropriate for the clients’ circumstances. While these cases are from different jurisdictions and different industries, the concept of "mission critical" is common to both and can be relevant in understanding the severity and consequences of their respective failures, as well as implications for the boards. This paper analyses recent cases where breach of directors’ and officers' duties claims were based on mission critical factors and reveals how these duties are changing in two jurisdictions, the United States and Australia. Further, the paper shows that the laws and regulations are already in place and provide adequate flexibility for courts of both jurisdictions to decide on mission critical/core obligations failures.