Corporate Directors: Their Right to Inspect
Ludlum, James, Jr.
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Explores the escalating standard of responsibility imposed (i.e., duty to inspect) imposed upon corporate directors. This article highlights the disparity among jurisdiction regarding whether corporate directors have an absolute or merely qualified right to inspect corporate documents in effort to fulfill the novel duty to inspect. The author identifies the key distinction between the absolute and qualified approaches as follows: An absolute right enables a corporate director to inspect all of the books, records, documents and papers of that corporation during the director’s tenure; in contract, a qualified right limits a corporate director’s right to inspect only to instances where such conduct could not result in harm to the corporation (i.e., no ability to inspect the corporation for wrongdoing). To counter this disparity, the author suggests the Texas legislature adopt a statutory mandate codifying a corporate director’s absolute right to inspect corporate records. Further, the author prompts the Texas legislature to establish and consolidate, into a single statute, the respective inspection rights of both corporate directors and former corporate directors to position Texas in a constructive leadership position to protect shareholders, directors, and the investing public.