Delaware Court of Chancery Decision Applies Duty of Oversight Liability to Corporate Officers

In a case of first impression, the Delaware Court of Chancery recently clarified that, like corporate directors, corporate officers owe a duty of oversight to the corporation.  In re McDonald’s Corporation Stockholder Derivative Litigation, 2023 WL 407668 (Del. Ch. Jan. 25, 2023).  This is the first time that a Delaware court has explicitly found that the same duty articulated in the 1996 Caremark decision concerning directors applies equally to officers.  Indeed, the court went so far as to opine that “the same policies that motivated [the Caremark court] to recognize the duty of oversight for directors apply equally, if not to a greater degree, to officers.”  However, the court also confirmed that corporate officers, like corporate directors, breach this duty only when their conduct “takes the form of bad faith.”

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