The decision to pursue litigation on behalf of a corporation belongs, in the first instance, to those who are most familiar with its operations and long-term strategy, the board of directors. This makes perfect sense from a policy perspective, as the corporation’s directors are better equipped than its shareholders to determine whether or not a particular course of action benefits the corporation.
Nonetheless, shareholders retain the ability to file lawsuits on the corporation’s behalf, and frequently bring “derivative” claims against the corporation’s officers and directors claiming breach of fiduciary duty or other wrongdoing. The filing of derivative litigation does not eliminate the board’s role in overseeing the litigation, but changes how it must be approached, since the shareholders are now asserting the right to pursue and control the litigation.
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