Delaware Judiciary Heightening Its Standards For Director Independence And Good Faith?

Over the past year, the Delaware Supreme Court and Court of Chancery have issued decisions that are, in certain respects, critical of the conduct of corporate directors. This summary of recent corporate developments helps lay the foundation to query whether these decisions can be seen as the Delaware judiciary's attempt to heighten corporate governance in response to the Sarbanes-Oxley Act and the new era of increased scrutiny for corporate actions. Specifically, the following decisions comment, among other things, upon the independence of directors and the importance of good faith in directors' actions. Instead of providing a litmus test for the standards that govern independence and good faith, however, these cases emphasize that questions of independence and good faith of director actions are driven by the unique facts underlying each case and the context in which the question is posed.

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