Two recent developments in civil and criminal law highlight the importance of active, engaged board oversight in the areas of risk and compliance. The first is a Delaware Supreme Court decision allowing plaintiffs to proceed with a Caremark claim, and the second is a memorandum released by the Criminal Division of the U.S. Department of Justice noting the role of the board in ensuring that compliance programs are implemented effectively. While the Delaware case sends a warning message to directors, the DOJ memorandum provides guidance for directors as they work to fulfill their oversight responsibilities.

‘Marchand v. Barnhill’

In June, the Delaware Supreme Court reversed a Court of Chancery decision and allowed plaintiffs to proceed with a lawsuit alleging that the board of directors of Blue Bell Creameries had breached its Caremark duties. In reaching such a determination, the Supreme Court noted that “Caremark claims are difficult to plead and ultimately to prove out … [T]o satisfy their duty of loyalty, directors must make a good faith effort to implement an oversight system and then monitor it.” While Marchand v. Barnhill does not signal a change in Delaware law, it serves as a cautionary reminder to directors that oversight requires active, ongoing engagement.

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