Tag: officers' fiduciary duties

Delaware VC Laster finds a “black swan”—a fiduciary duty of oversight for officers

In In re McDonald’s Corporation, defendant David Fairhurst, who formerly served as Executive Vice President and Global Chief People Officer of McDonald’s Corporation, contested a stockholders’ claim that he had breached his fiduciary duty of oversight by arguing that there is no fiduciary duty of oversight for officers, only for directors. VC Laster of the Delaware Chancery Court responded this way: “That observation is descriptively accurate, but it does not follow that officers do not owe oversight duties. For centuries dating back to the Roman satirist Juvenal, Europeans used the phrase ‘black swan’ as a figure of speech for something that did not exist. Then in the late eighteen century, Europeans arrived on the shores of Australia, where they found black swans. The fact that no one had seen one before did not mean that they could not or did not exist…. Framed in terms of the issue in this case, decisions recognizing director oversight duties confirm that directors owe those duties; those decisions do not rule out the possibility that officers also owe oversight duties.” With that—and a lengthy exposition—Laster confirmed that Fairhurst did indeed have a duty of oversight, much like the Caremark duties applicable to corporate directors.