[tskaiser]

I admit to be completely out of my depth, but my understanding is that it is a fiduciary duty of the directors to act in the best interest of the shareholders. Tax planning is a huge part of profit and thus shareholder value, so wouldn't such "gross negligence" represent a breach of fiduciary duty?

[pavlov]

Suing directors for negligence is not easy at all. It's hard to imagine a shareholder lawsuit that basically says: "As a director you didn't guide management to move operations to Jersey, so we want you to pay us $100 million"... It's even harder to imagine a US court being friendly to such a case.

The greatest example of board negligence in this industry (that I can think of) in recent years would be when Hewlett-Packard's board hired Léo Apotheker as CEO in 2010. The board members had never met the man and his career had been on a different continent, yet they didn't even interview him in person before giving him the job!

Apotheker spent $10.2 billion to buy a British company named Autonomy. Soon after he was fired. Only a year later, HP was forced to write down $8.8 billion of Autonomy's purchase price.

That enormous loss was directly the fault of HP's board for hiring such a terrible CEO and letting him do the terrible deal. But shareholders didn't have any recourse; the best they could do is vote on a new board.

[tskaiser]

Thank you for the insight. It is one thing what holds in theory, and quite another what happens in reality, as you point out.

[jmalicki]

It is actually quite common.

Here is a list of hundreds of such open lawsuits:

http://shareholdersfoundation.com/content/new-cases

[pavlov]

Yes, shareholder lawsuits are common. But it's the company that pays, not directors.

HP actually paid $100 million in such a lawsuit for the Apotheker/Autonomy flop:

http://www.reuters.com/article/us-hp-classaction-pggm/hp-pay...

The 2010 Board of Directors who created and permitted the $8.8 billion loss paid nothing. They kept their compensation, and most stayed on the board.

[jmalicki]

In Seinfeld v. Slager (2012) the Delaware Chancery Court rejected the notion that the directors have a fiduciary duty to minimize taxes.

https://www.delawarelitigation.com/2012/07/articles/chancery...