Corporate governance litigation: 2007 review: report from Delaware: a spotlight on several court rulings that moved the governance needle

Directors & Boards, Summer, 2008 by John L. Reed, Paul D. Brown

What these cases once again demonstrate is that the Delaware courts are neither shareholder nor management biased. Faithless fiduciaries beware--because Delaware's guiding principles are strict adherence to fiduciary duties, prompt enforcement of articles of incorporation and bylaws, and maximization of shareholder value. However, the business judgment rule remains alive and well in Delaware for directors who fully inform themselves, are free of economic or other disabling conflicts of interest, and whose only agenda is that of advancing the best interests of the corporation. While the facts and legal analyses confronting directors are many times complex, the cases often boil down to the smell test. So, don't be stupid, don't be greedy, and be able to articulate why, in your best judgment, what you did was in the best interest of the company.

The authors can be contacted at jreed@eapdlaw.com and pdbrown@eapdlaw.com.

John L. Reed (left) is a partner and Paul D. Brown is an associate in the Wilmington, Del., office of Edwards Angell Palmer & Dodge LLP, a full-service law firm with more than 600 attorneys in major U.S. markets and London (www.eapdlaw.com). They maintain a national business litigation and corporate counseling practice that covers all facets of corporate law and governance and issues arising under the Delaware General Corporation Law. Mr. Reed is listed in Chambers USA: America's Leading Lawyers for Business and Delaware Super Lawyers.