Recent developments in the Court of Chancery concerning a corporate board's duty to monitor and provide oversight over a corporation's operations, so-called Caremark claims, are likely to intersect with the Securities and Exchange Commission's (SEC) proposed new Environmental, Social, and Governance (ESG) disclosure obligations to create a new category of corporate risk.

In this article, we discuss the recent trends in Delaware law that have led to a revitalization of Caremark and the SEC's current proposals for enhanced ESG disclosure, the intersection of which can be expected to result in litigation and other corporate risk, and some commonsense steps corporations can take to mitigate this potential new category of risk.

The 'Caremark' Doctrine

One of the more notable developments in Delaware case law in recent years has been the revitalization of "Caremark duty" claims. Caremark actions traditionally were notoriously difficult to plead—in explaining the doctrine, the Chancery Court famously called it "the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment." In re Caremark Int'l Inc. Deriv. Litig., 698 A.2d 959, 967 (Del. Ch. 1996).