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Caremark'S Butterfly Effect, Angela N. Aneiros, Karen E. Woody

Scholarly Articles

In 1996, the Delaware Court of Chancery detailed the minimum standard for corporate boards of directors (“board”) with regard to corporate compliance programs and monitoring protocols. The landmark Caremark decision held that directors would not face liability for a breach of fiduciary duties unless they failed to implement a system of controls and compliance, or knowingly failed to monitor that system. In order to bring a successful Caremark claim, plaintiffs must prove that the board operated in bad faith by failing to exercise oversight in a sustained or systemic way. The Delaware Court of Chancery opinion noted that the theory …