Indemnification in Delaware: Balancing Policy Goals and Liabilities

Citation data:

Delaware Journal of Corporate Law, Vol. 29, No. 1, pp. 143-189, 2004

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Karl E. Stauss
Delaware; Journal; Corporate; Law; Board; Directors; Gross Negligence; Indemnification
paper description
In the wake of corporate financial scandals, questions about indemnifying and holding officers and directors personally liable come into focus. Delaware law provides a permissive and mandatory approach for protecting and indemnifying officers and directors. Case law presents a balance between policy goals of indemnification and liability for bad faith acts of individuals. Determining the boundary line for this balance necessarily invokes culpability standards for fiduciaries where delineation of due care, loyalty, and good faith are pivotal aspects of when personal liability may lie against an officer or director. Whether concepts of gross negligence can provide the basis for bad faith will affect individual liability. Analysis of recent corporate scandals may shed light on whether Delaware law appropriately addresses such matters.