On August 7, 2025, amid mounting scrutiny of Intel CEO Lip-Bu Tan’s investments in Chinese technology companies and his former firm’s export-control violations, President Trump posted that Tan was “highly CONFLICTED and must resign, immediately.” Within the week, Tan was at the White House. Within two weeks, Intel had agreed to sell the federal government a 9.9% equity stake at roughly $4 per share below the market closing price. In exchange, Intel would receive $8.9 billion in federal grants that had been awarded but not yet disbursed. President Trump summarized the bargain, noting that Tan had “walked in wanting to keep his job and he ended up giving us $10 billion.”
A derivative suit (Paisner v. Tan) is now pending in a Delaware federal court in which plaintiffs allege that Intel’s directors breached their fiduciary duties by approving a transaction that provided no meaningful consideration and was based on “well-founded fears over their personal and professional relationships,” all so Tan could “keep his job.” Whatever its merits, the complaint asks a question Delaware law has never squarely answered: What happens when a corporation uses its own assets to buy peace for an insider?
In a new article, I argue that such bargains present a category of conflicted transactions that implicates the duty of loyalty. I refer to them as protective settlements. They arise when a director, officer, or controlling shareholder faces credible personal exposure, and the corporation agrees to resolve the dispute by paying a premium that its own exposure would not justify. The insider receives the benefit of avoiding personal consequences, while shareholders bear the additional cost. Unlike conventional self-dealing, however, the transfer of value is difficult to detect. The corporation’s payment appears to be an ordinary settlement expense, while confidential negotiations, enforcement pressure, and the difficulty of separating corporate interests from personal ones obscure the premium paid to protect the insider.
The Price of Zuckerberg’s Peace
The 2019 Facebook-FTC settlement offers a rare instance in which a protective settlement became visible. Facebook, now Meta, engaged in privacy practices the FTC concluded violated an earlier consent order. As a result, the agency drafted a complaint naming both the company and its CEO, Mark Zuckerberg. The board’s first recorded instruction to counsel was to determine whether the FTC would settle without imposing personal liability on Zuckerberg.
The subsequent negotiations reveal how much Facebook was willing to pay to protect Zuckerberg. Initially, the company offered $1 billion. The FTC countered at $5 billion and insisted on naming Zuckerberg. Facebook raised its offer to $3 billion if the agency dropped that demand. The FTC held at $5 billion but agreed to accept governance reforms in place of pursuing Zuckerberg personally. Facebook ultimately paid the $5 billion and accepted sweeping privacy oversight and corporate governance reforms. The special committee that approved the deal could only “recommend,” not negotiate, and Zuckerberg attended most of its meetings.
The regulator said the rest aloud. When asked why the agency hadn’t deposed Zuckerberg, the FTC’s enforcement director explained that skipping that step let the agency obtain “more protections for the public.” When asked whether Facebook had pushed back, the officials fell silent, and the chairman conceded that naming Zuckerberg would have made settlement impossible.
Shareholders filed a derivate lawsuit in Delaware against Zuckerburg and other directors for breaches of fiduciary duty. At the pleading stage, Vice Chancellor Laster found it reasonable that paying many times the corporation’s actual liability to protect the CEO constituted a gift of stockholder money sufficient to support a claim of waste. The suit, however, settled in July 2025, one day before Zuckerberg was scheduled to testify. The Court of Chancery approved the $190 million settlement in April 2026. Zuckerberg paid nothing.
A Pattern in Corporate Enforcement
The Facebook settlement is unusual only in its visibility. Corporate enforcement actions have repeatedly raised questions about whether companies pay to shield executives from personal liability. Although the negotiations are typically confidential, certain features of these settlements offer clues, such as releases extending to officers and directors; statements of facts implicating senior executives who are never charged; regulatory statements tying corporate penalties to individual exposure; and investigative arrangements that reduce the likelihood of individual charges.
Screening the largest enforcement resolutions of the past 15 years for these markers reveals a pattern in which corporate settlements also benefit insiders facing potential personal exposure. The FTC’s 2025 settlement with Amazon most closely parallels Facebook’s. The agency sued Amazon and two of its senior executives in their individual capacities for deceptive business practices. The litigation ended mid-trial with a $2.5 billion settlement funded entirely by Amazon and no liability for the executives.
Situations in which executives are expressly named and then later dropped are rare. A more common pattern of protective settlements is a corporate resolution that ends or narrows an enforcement proceeding that might otherwise implicate insiders. For example, following two fatal crashes of its 737 MAX aircraft, Boeing faced severe DOJ regulatory scrutiny. In 2021, Boeing entered a deferred prosecution agreement (DPA) with the DOJ, resolving the corporate criminal case despite a record indicating that multiple company insiders were aware of the underlying misconduct. Boeing agreed to pay over $2.5 billion in fines and compensation, while no top executives, directors, or officers were charged. Through these and other examples, a pattern emerges in which corporate settlements can shield insiders from personal liability while confidential negotiations obscure whether the corporation paid a premium for that protection.
Intel presents the newest and most explicit variation of a protective settlement. Unlike in traditional enforcement settlements, the accusations came from the White House, the threatened consequence was removal rather than a penalty, and the consideration was equity rather than a fine. Yet the underlying structure was the same. An insider faced credible personal pressure, the corporation bore the cost, and the insider received the protection. Whether the facts bear it out is for the court, but the theory Paisner advances is a protective settlement in all but name.
The Limits of Delaware’s Existing Doctrines
Delaware has addressed the problem only in part. In Maffei v. Palkon, the Delaware Supreme Court applied the business judgment rule to TripAdvisor’s reincorporation in Nevada, a decision the company correctly acknowledged would reduce its fiduciaries’ exposure. The court expressly distinguished transactions that reduce the risk of future liability from those designed to shield fiduciaries from liability for past misconduct. It recognized that only the latter situation may confer a non-ratable benefit on insiders and therefore warrant heightened scrutiny. That distinction matters for protective settlements because they fall into the latter category, and Maffei does not resolve which standard of review applies in that context.
Delaware’s existing doctrines offer several possible answers, but each ultimately proves inadequate. Entire fairness review asks whether the corporation paid a fair price. Courts ordinarily answer that question by comparing the price with what the same asset would fetch in an arm’s-length transaction. But there is no market for an insider’s protection from personal liability, so there is nothing to compare the price to. And because the premium is bundled with the legitimate settlement amount and governance commitments, a court cannot even isolate how much the corporation paid for the insider’s protection. Section 144, especially after SB 21, may restore deference precisely when scrutiny is needed most. The amended statute presumes director independence and eliminates the ab initio requirement, allowing a controller or powerful CEO to negotiate a settlement and then seek approval from directors who owe him their seats. Corporate waste also fails because its demanding standard lets virtually any plausible business justification, including retaining a valuable executive, defeat the claim. Moreover, like entire fairness, it requires a baseline against which to measure the overpayment, something that confidentiality conceals.
A Loyalty-Centered Framework for Judicial Review
Having identified the problem, the article proposes a two-step framework for reviewing protective settlements, organized around how the board addressed the underlying conflict of interest rather than trying to determine the cost of insider protection. The first step is to identify potential protective settlements. Majority statements, dissents, press conferences, and statements of facts routinely reveal whether individual exposure influenced the bargain, as the FTC did in Facebook and President Trump did in Intel. Where these signals provide a credible basis for suspecting a protective settlement, Section 220 books-and-records inspection should automatically extend to board and committee minutes as well as the materials the board received — categories still presumptively available after SB 21. Securities law should also require disclosure of any insider release and of any fiduciary named in draft charging documents.
Once credible indications of a protective settlement emerge, the second step examines whether the board adequately addressed the conflict. A credibly pleaded protective settlement should create a rebuttable presumption of waste and an inference of bad faith, potentially precluding exculpation and protection under Section 144. The board may rebut the presumption through a process inquiry modeled on Zapata v. Maldonado, demonstrating that an empowered committee was authorized to negotiate or oversee the negotiations, that its members were functionally independent of the protected insider, and that they obtained the information needed to separate corporate peace from personal protection.
This approach shifts the judicial focus from calculating the protective premium to asking whether the board understood the conflict and engaged in a process capable of prioritizing the corporation’s interests. When the presumption stands, the protected insider should bear the the cost of the premium, and the approving directors should be liable only when that avenue of recovery is unavailable.
Whose Peace, and at Whose Expense?
The pending Paisner litigation provides an opportunity to apply this framework to Intel’s transaction. The central question is whether the board adequately addressed the conflict between Intel’s interests and Tan’s personal exposure. Tan negotiated directly with President Trump, who had publicly demanded his resignation. But was there an empowered committee of directors independent of Tan? And did the board distinguish Intel’s interest in securing the federal funds from Tan’s interest in keeping his job?
The government’s lawyers can point to Intel’s increasing share price as evidence that the transaction actually benefited shareholders. But a rising stock price does not answer the loyalty question. Shareholders may benefit from resolving a dispute even when the corporation pays more than necessary to protect an insider. The relevant inquiry is whether Intel could have paid less for corporate peace, and whether Tan should have borne the cost of the premium himself.
Regulators, and now the White House, have discovered that an insider’s peace is a priceable asset. Delaware polices insiders closely when they extract value through mergers, compensation, and controller transactions. It should not go silent when they extract value through settlements.
Yehonatan Shiman is an assistant professor at Ono Academic College, Faculty of Law, and the director of the Law Program at Ono International School. This post is based on his article, “Protective Settlements: How Corporations Pay to Shield Insiders from Liability,” forthcoming in the Villanova Law Review and available here.