Caremark’s Fractured State
Delaware’s hegemony in U.S. corporate law is indisputable. Law students are taught Delaware corporate law, and corporate law practitioners are expected to be well-versed in Delaware’s doctrinal nuances. Regardless of one’s opinion about the benefits provided by Delaware incorporation, Delaware’s preeminence has created a shared corporate law language that bridges jurisdictional boundaries. The Caremark doctrine […]
Itai Fiegenbaum is an Assistant Professor of Law at St. Thomas University College of Law. This post is based on his recent paper, forthcoming in The Business Lawyer, and is part of the Delaware law series; links to other posts in the series are available here.
Delaware’s hegemony in U.S. corporate law is indisputable. Law students are taught Delaware corporate law, and corporate law practitioners are expected to be well-versed in Delaware’s doctrinal nuances. Regardless of one’s opinion about the benefits provided by Delaware incorporation, Delaware’s preeminence has created a shared corporate law language that bridges jurisdictional boundaries.
The Caremark doctrine exemplifies this state of affairs. Chancellor Allen’s novel declaration of a proactive board-level monitoring obligation, even in the absence of suspected wrongdoing, propelled it to the pantheon of influential corporate law decisions. Caremark’s framework for assessing board liability invigorated the board’s oversight role and jumpstarted the compliance industry. Nearly three decades after it was handed down, Caremark remains a common staple in corporate law casebooks, and an accepted shorthand for the board’s oversight obligation.
