CCO Resource Center: Director Liability for Risk
Chief Compliance Officer Committee
Director Liability for Risk
In June 2019, the Delaware Supreme Court issued a decision in Marchand v. Barnhill that sheds light on a board’s duty of loyalty to shareholders under Delaware. In this case, which involved an ice cream manufacturer, the Court reaffirmed Caremark Int’l Inc. Derivative Litig., in which the Court held in 1996 that a board is responsible for making “a good faith effort to put in place a reasonable system of monitoring and reporting about a corporation’s central compliance risks.”1 In the Marchand case the Court found that, even though “food safety was essential and mission critical,” to Blue Bell ice cream, the firm’s board failed to put in place a system of board-level compliance monitoring and reporting. Based on this, the Court remanded the case for the lower court to determine whether the board’s failure constituted a breach of the board’s duty of loyalty.
- A copy of the ICI’s July 26, 2019 Memo summarizing this case is available at: https://www.ici.org/my_ici/memorandum/memo31870.
- A copy of the Court’s ruling in Marchand v. Barnhill is available at: https://courts.delaware.gov/Opinions/Download.aspx?id=291200.
1 Decision at p. 36.
The documentation provided by ICI that may be accessed by the CCO Committee members is restricted to members’ use only and not for distribution or reproduction. Documentation may be used internally at member organizations as needed.