DEVELOPMENTS IN US CORPORATE LAW IN DELAWARE: MISSION-CRITICAL RISK OVERSIGHT
The landscape of board and officer oversight under Delaware law has evolved significantly over the past decade. While the foundational principles stem from the Delaware Chancery Court’s landmark 1996 Caremark decision, recent cases have clarified, and in some instances expanded, the circumstances under which directors and officers (D&Os) may face exposure for failing to oversee compliance and risk functions.
For compliance and risk leaders, these developments are not merely legal developments. They provide a roadmap for structuring reporting systems, escalating concerns and documenting board-level oversight in ways that protect both the organisation and its leadership. More importantly, they clarify which risks demand the highest level of attention and formality.
The evolution of oversight liability
The original 1996 Caremark decision established that directors, as part of their duty of loyalty, must implement and monitor systems designed to ensure compliance with law and corporate obligations. The bar for liability, however, remained exceptionally high: only an “utter failure” to implement oversight systems or a conscious failure to respond to red flags could support a claim.
In 2006, the Delaware Supreme Court reinforced this standard through Stone v. Ritter, explaining that liability attaches only when directors act in bad faith by knowingly disregarding their oversight responsibilities. For more than a decade, Caremark claims rarely survived motions to dismiss.
Jan-Mar 2026 Issue
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