Shearman & Sterling Discusses the Cleansing Effect of Stockholder Ratification

It has long been a policy of corporate law1 that the informed business decisions of independent and disinterested directors are protected by the presumption of the business judgment rule.2  Courts are reluctant to second-guess decisions that are made by directors in good faith and with the requisite degree of care.  This reluctance remains evident in the recent decisions of Delaware courts, holding, in two lines of cases, that the presumption of the business judgment rule should apply both to certain transactions involving conflicted controlling stockholders and to transactions not involving conflicted controlling stockholders, that would otherwise be subject … Read more