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The duty of care is one of three core fiduciary duties every board director carries.
It requires directors to act with the same diligence, attention, and informed judgement that a reasonably prudent person would apply. In practical terms: review the materials, ask the hard questions, and make decisions based on fact rather than assumptions.
This guide covers what the duty of care requires in practice, how it differs from the other fiduciary duties, what a breach looks like, and how boards can build strong habits that keep them on the right side of it.
Understanding the Three Fiduciary Duties
Board directors carry three fiduciary duties. Understanding how they relate helps clarify what the duty of care actually demands.
- Duty of Care: Act with diligence and informed judgement in every decision
- Duty of Loyalty: Put the organization’s interests above your own
- Duty of Obedience: Follow the organization’s bylaws, mission, and applicable law
These duties work together. A director who votes on a contract they have a personal financial stake in may violate the duty of loyalty. A director who approves that same contract without reviewing it may also violate duty of care.
These standards are related by uniquely distinct.
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What is Duty of Care?
The duty of care is a legal and ethical obligations that requires board of directors to be informed, attentive, and deliberate when making decisions on behalf of the wider organization. It does not require directors to be right — it requires them to be reasonably careful in how they arrive at a decision.
Courts typically evaluate whether a director met the duty of care by asking whether they acted as an “ordinarily prudent person” would under the same circumstances. The standard involves:
- Reviewing board materials before meetings
- Asking questions when something is unclear or incomplete
- Leverage board portal software to fully understanding board commitments
- Seeking expert advice when decisions fall outside the board’s expertise
- Participating consistently across the full board meeting lifecycle
- Documenting decisions through accurate board meeting minutes
The duty of care applies to every board vote, every approval, and every oversight responsibility a director holds.
Duty of Care vs. Duty of Loyalty
The duty of loyalty requires a formal conflict of interest policy that sets clear expectations for disclosure and recusal. The duty of care requires consistent engagement: reading board materials, attending meetings, and exercising strong and independent judgement.
How to Meet the Duty of Care
For most directors, the duty of care is about habits more than legal strategy. Boards that consistently meet the standard tend to share these practices:
- Board materials are distributed in advance, and directors review before meeting
- Committees do substantive work on complex topics so the full board receives analyzed recommendations, not raw data
- Directors request independent expert opinions on decisions that fall outside of their collective expertise
- Meeting minutes capture the key information considered and questions raised, not just what was decided
- Directors who miss meetings are briefed on decisions made in their absence
Regular board self-assessments help boards identify governance gaps before they become liability risks. Board governance training is another practical tool particularly for new directors who need to understand their obligations before they start voting.
Breach of Duty of Care Examples
A breach of duty of care occurs when a director fails to meet the standard of reasonable diligence in their role. Common examples include:
- Approving a major financial transaction without reviewing financial statements
- Consistently missing board meetings and failing to stay informed
- Relying entirely on management’s recommendations without independent review
- Failing to investigate a known problem — compliance issue, financial irregularity
- Rubber-stamping decisions in a high-pressure meeting without deliberation
In corporate settings, shareholders or regulators may bring action against individual directors for breach of the duty of care. In nonprofit settings, state attorneys general may investigate whether board conduct met the legal standard. Consequences can include personal liability, removal, and reputational damage to the organization.
The business judgement rule offers some protection: courts generally defer to a director’s decision if it was made in good faith, on an informed basis, and without conflict of interest.
How OnBoard Supports Duty of Care
Meeting the duty of care requires directors to be informed before every decision.
OnBoard’s board management platform makes it easier by centralizing board materials, tracking engagement, and maintaining a secure record of every meeting and vote.
- Distribute board books and materials in advance so directors arrive prepared
- Track who has reviewed materials before the meeting
- Capture accurate minutes that document the information considered and decisions made
- Maintain a searchable archive of resolutions, policies, and governance documents
When a question arises about whether the board exercised appropriate care — from a regulator, a shareholder, or legal counsel — a complete and organized governance record is the board’s best protection.
Discover how OnBoard can support your board — schedule a demo.
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Frequently Asked Questions
What is duty of care for board directors?
The duty of care requires board directors to act with diligence, attention, and informed judgment when making decisions on behalf of the organization. It means reviewing relevant information, asking questions, seeking expert advice when appropriate, and participating consistently in board work.
What are the three fiduciary duties of a board director?
The three fiduciary duties are the duty of care (act with diligence and informed judgment), the duty of loyalty (put the organization’s interests above your own), and the duty of obedience (follow the organization’s bylaws, mission, and applicable law).
What is the difference between duty of care and duty of loyalty?
The duty of care governs how a director makes decisions — requiring diligence and informed judgment. The duty of loyalty governs whose interests they serve — requiring directors to avoid self-dealing and disclose conflicts of interest. Both can be violated in the same transaction.
How can boards make sure they meet the duty of care?
Distribute board materials in advance, use committees to analyze complex topics, document the reasoning behind decisions in meeting minutes, conduct regular board assessments, and maintain organized governance records through a board management platform.
About The Author
- Tyler Naples is an SEO Strategist focused on building scalable organic growth systems for OnBoard, the leading board management software solution. He specializes in connecting high-intent traffic segments with content that ranks, resonates, and converts.
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