Shearman & Sterling explains Compliance with the Formal Approval Requirements of Delaware Law Required for Stockholder Ratification of Director Compensation

On October 28th, the Delaware Chancery Court, in Espinoza v. Zuckerberg, et al. (“Espinoza”)[1], held that stockholder ratification of a transaction that was approved by an interested board of directors must be accomplished formally through a vote at a stockholders’ meeting, or by written consent in compliance with § 228 of the Delaware General Corporation Law (the “DGCL”).[2] In answering this question of first impression, the Court found that Facebook’s controlling stockholder, Mark Zuckerberg, did not provide valid ratification of what the parties agreed was a self-dealing transaction when he expressed his approval of Facebook’s non-employee director … Read more