The Bar for Board Performance Has Been Raised—Recent Delaware Decisions Confirm New Standards for “Mission Critical” Activities Such as Health Care

• November 25, 2020

• Philip M. Sprinkle, II , Akerman LLP
• Danielle C. Gordet , Akerman LLP

As part of the ongoing evolution of guidance on specific Board of Director duties, recent decisions by Delaware's Chancery and Supreme Court (Delaware Cases) now provide clarity and specifics in the evolution of the fiduciary role of Directors. These decisions expand the definition of the duty of loyalty. More importantly, they confirm objective components of the duty of loyalty for which members of a Board of Directors will be responsible and will be subsequently evaluated (and potentially subject to personal exposure), especially in highly regulated industries with "mission-critical" compliance risks. At their core, the Delaware decisions in Marchand, Clovis, and Teamsters (each discussed in more detail below) demand that Board members take an active and, in most instances, a non-delegable role in ensuring that corporations abide by state and federal laws and regulations. Culminating in the recent Teamsters case, the days when "the absence of facts showing self-dealing or improper motive" was enough to establish loyalty and good faith and shield the Board against most claims of breach of fiduciary duty now appear to be long gone.

ARTICLE TAGS

• Fraud & Abuse Practice Group
• Fraud and Compliance
• Governance