Don’t Compound the Caremark Mistake by Extending It to ESG Oversight

Since the foundational decision in In re Caremark Intern. Inc. Derivative Litig.,[1] Delaware corporate law has required boards of directors to establish reasonable legal compliance programs. Although Caremark has been applied almost exclusively with respect to law and accounting compliance, the original Caremark decision contemplated applying the oversight duty to the corporation’s “business performance.”[2] Accordingly, Caremark claims plausibly could lie in cases in which the corporation suffered losses, not due to a failure to comply with applicable laws, but rather due to lax risk management.

In fact, several commentators have argued that Caremark liability extends—or, at least, … Read more