Corporate Governance

In re Lear Corporation: Waiver of Liability Provisions and the Myth of Van Gorkom (5)

By J. Robert Brown

We are discussing In re Lear, an opinion by VC Strine.  He implies that Delaware authorized waiver of liability provisions because of the Van Gorkom decision (implicitly criticizing the case).  As his opinion notes:

• After Van Gorkom met an unenthusiastic reception, the General Assembly adopted Sec. 102(b)(7), authorizing corporations ot exculpate their directors from liability for violations of the duty of care.
  

Not true, as the paper Opting Only in: Contractarians, Waiver of Liability Provisions, and the Race to the Bottom points out.  At least according to the legislative history of the provision, the impetus was the so called "insurance crisis," something that affected all aspects of commercial insurance, D&O insurance included.  The "crisis" began long before the decision in Van Gorkom.  That is not to say that waiver of liability provisions were not really designed to overturn Van Gorkom (an opportunistic way to weaken fiduciary duties) but that is not the stated reason.

Full post as published by The Race to the Bottom on October 08, 2008 (boomark / email).