Now that the Delaware Supreme Court has finally opined on Disney, maybe the old gang that has gathered in this space before would like to get back together to discuss the case. I've already posted at my home site.
Let me suggest a few topics if anybody wants to join in, most of which are touched on in my post:
1. The future of due care and Van Gorkom. What does this case say about the nature of gross negligence?
2. What are the case's implications for bad faith and the application of 102(b)(7)? What kinds of facts might constitute bad faith? Given the court's view of bad faith, is there any longer a meaningful role for gross negligence?
3. What, if anything, does the case say about how it might address the undecided questions, such as the application of the bjr to officers.
4. What does the case imply about Roe's thesis concerning federal law's impact on Delaware?
5. What can be said now about the relation between Delaware and the federal law of corporate governance? Has federal law taken over the Caremark business just as it has disclosure?
6. What, if any, role do theories of "good governance" and best practices have on directors' liabilities after Disney?
7. What are the decision's implications for the executive compensation debate?
8. What's likely to be the single biggest effect of this decision?
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1. Posted by Gordon Smith on June 9, 2006 @ 10:33 | Permalink
Great list of questions, Larry. This is like a Disney research agenda! I have invited the previous participants in the Conglomerate Forum: Disney to post their thoughts, so I hope we will get some further discussion that way.
I am intrigued by that last question. One friend from Delaware emailed to say that the decision was anticlimactic. If you were expecting fireworks -- which I was, actually -- then the final product was anticlimactic. It's hard to think of ways in which the world is materially different today from yesterday because of this new opinion.
That, in fact, might be the most important legacy of Disney. Even in this case, where the board performed so poorly, they performed well enough because they didn't have conflicts of interest. As you and I have both observed, this case reinforces the notion that fiduciary duties are about policing conflicts. All the rest is just talk.
2. Posted by benzibox on June 9, 2006 @ 16:31 | Permalink
The Disney opinion seems likely to drive future actions away from boards and towards officers, who do not benefit from the exculpation afforded by Section 102(b)(7). With the renewed deference to board discretion and the erection of high barriers to recovery (if not pleading) as against directors, plaintiffs may well target officers. Officers are more easily attacked as self-interested and do not appear to enjoy the same favor as the Disney court granted to boards.
Having said this, the reality is that cases that go to trial are a rarity and the outcome in a specific matter will turn far more on the relevant pleading standard. It remains to be seen whether Disney will lead to more dismissals at the pleading stage since plaintiffs can easily adapt if allowed to plead breaches of duty generally and without further detail If so, this decision's impact in the real world may be far less than in the academic setting.
3. Posted by Darian Ibrahim on June 9, 2006 @ 18:44 | Permalink
Re: Larry's questions 1 and 2, if bad faith is non-exculpable, then bad faith in the form of a conscious disregard of duties (a higher standard than gross negligence) could constitute a due care violation, right? So even if fn 112 casts doubt upon whether breach of the duty of good faith is compensatable, could bad faith still be compensatable as a care violation?
And what in the world are the sort of things that will be a conscious disregard of duties? couldn't a creative court now recast something it would have called gross negligence in the past as a conscious disregard of duties if it wanted to impose liability?
4. Posted by Jake on June 10, 2006 @ 22:57 | Permalink
All this learned debate is way over my head. Why not let juries sort out these fine gradations of corporate culpability?