New Legal Protections for CEOs Pop Up on Proxies

Delaware companies have been given the green light to protect corporate officers from personal monetary liability in breach of fiduciary duty claims after the state adopted new amendments to its corporate law provisions in August. But to make use of the provisions, known as officer exculpation, companies will have to update their charters and gain shareholder approval.

Delaware – where the bulk of the U.S.’s public companies are incorporated – has allowed companies to offer the same protection to directors for nearly four decades, and legal experts said the recent move blocked a strategy that plaintiffs’ fiduciary duty breaches in order to put more pressure on the company to settle. Experts also agreed that, once officer exculpation becomes more widely adopted, it could impact executive recruitment and retention.

…A review of the proxies for recent and upcoming annual meetings showed that only eight companies in the S&P 500 and Russell 3000 have put forth shareholder proposals on officer exculpation, according to data from public intelligence provider MyLogIQ.