The active participation of men and women as independent directors of public companies is an essential element of corporate governance. Although the common law of Delaware has “rightly emphasized the need for independent directors to be willing to say no to interested transactions proposed by controlling stockholders,” the Delaware Supreme Court has recently clarified that “it does not follow that it is prudent to create an invariable rule that any independent director who says yes to an interested transaction subject to entire fairness review must remain a defendant until the end of the litigation, regardless of the absence of any evidence suggesting that the director acted for an improper motive.” In re Cornerstone Therapeutics Inc. Stockholder Litigation, 2015 WL 2394045 (Del. Supr. May 14, 2015) at *8. The court held that, to survive a motion to dismiss against an exculpated director, a plaintiff seeking damages must plead non-exculpated claims “regardless of the underlying standard of review for the board’s conduct….” Id. at *1.
Before ‘Cornerstone’
Section 102(b)(7) of Delaware’s General Corporation Law, enacted in 1986, permits a certificate of incorporation to include “[a] provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director” as long as the provision does not eliminate or limit the liability of a director for (i) breach of the director’s duty of loyalty, (ii) acts or omissions not in good faith, (iii) unlawful payment of dividend or unlawful stock purchase or redemption, and (iv) deriving an improper personal benefit.
