Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Corporate CounselorLJN NewslettersNewsSections

Lack of Director Independence Under Delaware Law

By Lewis H. Lazarus and Katherine J. Neikirk
September 26, 2007

As readers are well-aware, Sarbanes-Oxley, the New York Stock Exchange and NASDAQ have established standards for director independence. These are not the only director independence standards that can affect a corporation and its board. Director independence is also significant under Delaware law. Although similar, the standards for director independence under Sarbanes-Oxley ('SOX'), stock exchange rules and Delaware law differ. A director who is independent under SOX may not be independent under stock exchange rules or Delaware law and vice versa.

So why does it matter if a director is independent under SOX and/or stock exchange rules, but not Delaware law? If stockholders sue directors of a Delaware corporation (the majority of Fortune 500 companies and companies on the NYSE are incorporated in Delaware) for breach of fiduciary duties, it is likely that a court will apply Delaware law. A finding that a majority of directors is not independent under Delaware law can have serious consequences, including increased litigation expenses, in fiduciary duty litigation.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It Image

Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?

Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

A Lawyer's System for Active Reading Image

Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.

Blockchain Domains: New Developments for Brand Owners Image

Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.