Director Officer Liability

Delaware decision makes clear that officers of Delaware corporations owe the same fiduciary duties as corporate directors, although they do not benefit from permissible statutory exculpatory clauses available to directors.

The Supreme Court of Delaware in Gantler v. Stephens, 965 A.2d 695 (Del. Jan. 2009) held that corporate officers owe the same fiduciary duties as those owed by corporate directors. The court settled any ambiguity concerning fiduciary duties owed by corporate officers while following Delaware Supreme court cases that had implied as much but had not explicitly arrived at such a holding. In footnote 37 of the court’s opinion, the court noted that even if a corporate director and a corporate officer are found to have breached the same fiduciary duty, the consequences may not be the same. Under Delaware 8 Del. C. § 102(b) (7), the shareholders may approve the adoption in the corporation’s certificate of incorporation of a provision exculpating its directors from liability for breach of their duty of care. Most Delaware corporations include such clauses in their certificates of incorporation. But the statute does not extend to officers. The court left that to the legislature, noting that it is “legislatively possible” to have a “… statutory provision authorizing comparable exculpation of corporate officers.” Absent such legislative action, however, officers of Delaware corporations may be more exposed to liability for breach of their duty of care than corporate directors.

Written by Andre Castaybert | Download v-card