Delaware Supreme Court Addresses Collaborative Nature of Board of Directors

Delaware Supreme Court Addresses Collaborative Nature of Board of Directors

      In the decision rendered earlier this week in which the Delaware Supreme Court affirmed a long and complicated decision of the Court of Appeals, it provided some overarching comments on a variety of topics, including the collaborative functioning of the Board of Directors. Optimiscorp v. Waite, No. 523, 2015 (Del. April 25, 2016).

      Addressing a less than forthcoming notice of the meeting of the Board of Directors, it concealing the fact that an item on the agenda was the proposed amendment of the shareholder agreement that would strip certain parties of the right to elect a defined portion of the Board of Directors, the court wrote:

As important, we are reluctant to accept the notion that [Delaware corporate law] vindicates the board’s right to govern the corporation to encourage board factions to develop Pearl Harbor-like plans to address their concerns about the company’s policy directions or the behavior of management. Rather, it has long been the policy of our law to value the collaboration that comes when the entire board deliberates on corporate action and when all directors are fairly accorded material information. The Court of Chancery’s opinion can be read as indicating that a board faction may engage in deception toward other board members in giving notice of what a special meeting should address so long as the faction subjectively believes that its intended end is good for the corporation. Nothing in our affirmance should be read as endorsing that view, or as expressing any view on a line of fact-specific rulings where inequity was found in deceiving a director about the action intended to be taken at a board meeting.