Are you a CEO, CFO, or HR chief? A new ruling in Delaware says you owe a fiduciary duty of oversight to your company.

It is wrong and immoral to seek to escape the consequences of one’s acts.
— Mahatma Gandhi

Summary

Wow, talk about a game-changer in the world of corporate America!

A recent ruling by a Chancery Court judge in Delaware has made headlines in the business community. The judge ruled that corporate officers have a fiduciary duty of oversight to their company, just like corporate board members.

This decision is a first of its kind and has the potential to have a significant impact on the responsibilities of corporate officers in the United States.

The case at the center of this ruling involved former McDonald’s Chief Human Resources Officer David Fairhurst. Shareholders sued Fairhurst for allegedly allowing sexual harassment and misconduct to occur in the company, which was seen as a breach of his duty to the company.

The judge ruled in favor of the shareholders, stating that corporate officers owe the same fiduciary duties as directors and that officers who fail to fulfill their oversight duties can be sued derivatively by shareholders.

So, what does this mean for corporate America? If you’re in a leadership role in a company incorporated in Delaware, this ruling is definitely worth paying attention to. Delaware is the premier destination for incorporating companies in the US, with over one million American companies calling it their legal home. In fact, 60% of Fortune 500 companies are located in Delaware, which gives you an idea of just how significant this ruling could be.

The decision confirms that non-board directors, such as CEOs, CFOs, general counsel, and human resources chiefs, owe a duty of loyalty to their companies and can be held accountable for failing to fulfill their oversight duties. This is a huge shift from the traditional understanding of corporate officers’ responsibilities and could lead to increased accountability and vigilance among executives.