For years In re Caremark was the definitive decision from the Delaware courts on board oversight of compliance programs. Decided in 1996, the Delaware Court of Chancery held that directors had a duty of care. However, as Rebecca Walker of the firm Kaplan & Walker explains in this podcast, the bar was still a bit low. The Board could only be held responsible, the Court found, if it utterly failed to implement monitoring and reporting systems, or consciously failed to oversee them.
Now, though, thing seem to have changed. In Marchand vs. Barnhill, the Delaware Supreme Court held that, if boards fail to put in place a reasonable system of monitoring and oversight in key compliance risk areas, they may be subject to liability for related compliance failures. The Court wrote: “Caremark does have a bottom-line requirement that is important: the board must make a good faith effort—i.e., try—to put in place a reasonable board-level system of monitoring and compliance.”
Listen in as she outlines the Court’s decision and the implications for board oversight of compliance programs. And, to learn more, SCCE members can look up her article in the SCCE magazine or on Cosmos.