Corporate directors are obliged to act in good faith and with due diligence, care, and skill akin to a reasonably prudent person under similar circumstances. They must monitor corporate activities, establish effective controls, and take reasonable steps to prevent fraud. Directors should not be passive; they must proactively engage with the company’s financial and operational affairs to detect and prevent fraudulent behavior.
For example: A corporate director regularly reviews financial reports, notices irregular transactions, and immediately launches an investigation, thereby preventing further fraudulent activity.