Is It Still Safe To Be An Independent Director?

At Seyfarth Shaw LLP, we pay particular attention to legal developments affecting corporate Board members. Of particular interest is a recent Delaware appellate court decision involving the Walt Disney Company. Independent directors have always taken comfort in the “business judgment rule” which says that if directors were loyal, careful, well informed and made decisions based on advice from legal counsel, investment bankers and other experts, they would be protected from liability. The Delaware court in Disney may have raised the bar by implying that its board could not rely on the business judgment rule if the directors exercised “no judgment” or if they failed to make a good faith attempt to fulfill their fiduciary duties. The directors in Disney had relied on a compensation expert who later admitted that he had failed to calculate the cost of a severance package. The Disney directors are still on trial.