The exact contours of liability for executives and officers who fail to comply with oversight duties have been a long unresolved issue. Those seeking to determine whether and to what extent executives and officers are liable for employee misconduct, were sent down a winding and murky path in the wake of In re Caremark International Derivative Litigation, 698 A.2d 959, 961 (Del. Ch. 1996) (Caremark), and its progeny.

While Caremark unquestionably established directors and officers owe a duty of oversight, exactly what that means and how executives and officers should be expected to comply with such a duty were questions left unanswered—that is, until the Delaware Court of Chancery recently issued its ruling in In re McDonald’s Stockholder Derivative Litigation, 289 A.3d 343, 354 (Del. Ch. 2023) (McDonald’s).

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