Twenty Years after Smith v. Van Gorkom: An Essay on the Limits of Civil Liability of Corporate Directors and the Role of Shareholder Inspection Rights

Abstract:     
With director monetary liability for lack of care (appropriately, in the author's view) fading or disappearing altogether since Smith v. Van Gorkom, litigation invoking the duty of care seems increasingly unlikely to serve as a vehicle for public scrutiny of, and reputational sanctions for, director conduct that is substandard but does not involve self-interest or lack of good faith. It is therefore increasingly important to examine when information obtained through the exercise of stockholder inspection rights can be made public. A recent case involving the Walt Disney Company - but not the well-known litigation involving Michael Ovitz' termination compensation - addresses the issue of confidential treatment of such information. Prompted by the Court of Chancery's treatment of the issue, this Article proposes that the courts review and balance a number of factors - the subject matter of the information, the level of public interest in the information, the motives of the stockholder in seeking the information and (perhaps) ultimately seeking to make it public, and the context in which the information was generated - to determine whether information afforded pursuant to stockholder inspection rights should remain confidential.

Number of Pages in PDF File: 25

Keywords: corporation law, Delaware, duty of care, stockholder inspection rights, confidentiality, directors

JEL Classification: K22

Accepted Paper Series