This is because the board's power - which is that of an agent's with regard to its principal - derives from the shareholders, who are the ultimate holders of power under Delaware law.
UniSuper Ltd. v. News Corp., 2005 Del. Ch. LEXIS 205 (Del. Ch. Dec. 20, 2005) (footnote omitted). Shortly thereafter, Chancellor Chandler issued this clarification:
The board of directors owes fiduciary duties to the shareholders. In the Opinion, this Court referred generally to agency law principles to illustrate why the nature and purpose of fiduciary duties is to serve as a shield for shareholders, not as a sword for directors to use against shareholders as a group. Although the Opinion employed agency law principles to illustrate by analogy the gap filling nature of fiduciary duties, it did so in an effort pointedly to reject defendants’ effort to invoke the board’s fiduciary duties as a muzzle to silence shareholders.
Unisuper, Ltd. v. News Corp., No. 1699 (Del. Ch. Jan. 19, 2006).
Nonetheless, the agency status of directors continues to be controverted. Writing for Securities Regulation Daily, Anne Sherry notes that the plaintiff in a recent whistleblower case is arguing that directors are agents for purposes of 15 U.S.C. § 1514A which prohibits publicly traded companies and their officers, employees, contractors, subcontractors, or agents from retaliating. In opposing the defendants' motion to dismiss, the plaintiff argues:
Board members, who after all are responsible for making the most important decisions for a company, are clearly authorized to act on behalf of the company and thus qualify as “agents.” Thus, where a board terminates an employee, the board and its constituent members are necessarily agents of the company and, as such, can be held liable under SOX for that conduct.
The defendants counter:
But individual directors are not authorized to act for or in place of the corporation, and in their individual capacity they cannot bind the corporation.
Chief Magistrate Judge Joseph C. Spero will hear the parties' arguments in the case, Wadler v. Bio-Rad Laboratories, Inc., on September 4, 2015 in the U.S. District Court in San Francisco.