Boards should take stock of their oversight systems following two separate rulings this year in the Delaware courts that allowed claims that directors did not fulfill their oversight duties to move forward.
RK&O partner Scott Budlong was interviewed by Agenda (a boardroom resource platform published by the Financial Times) about the two DE duty-of-oversight cases—involving Blue Bell Creameries and Clovis Oncology—and the impact they might have on the contours of directors’ Caremark liability under Delaware law. Mr. Budlong distinguishes the lawsuits from standard scenarios on account of the regulated nature of the two companies, the impact of product-related missteps and the fact that in both cases, central to the claims were products that were material to the companies’ futures. “They don’t mean that the high bar of Caremark is crumbling,” he says of the opinions.
At the same time, Mr. Budlong also noted the increased interest in boards’ oversight duties from investors and courts alike. “There’s an ongoing conversation on the broader corporate governance level about what degree of diligence directors have to employ just overall, in their roles as directors,” he explained. “Ultimately, the cases add to the general shift in the zeitgeist of what it means to be a corporate director.”
Delaware Decisions a ‘Significant’ Departure on Oversight - Subscription required