Thu Sep 26 13:32:33 UTC 2024: ## Delaware’s New Officer Exculpation Law Sees Mixed Adoption Among Fortune 1000 Companies

**Wilmington, DE** – A new Delaware law allowing companies to shield their senior officers from personal liability for breaches of their duty of care is seeing mixed adoption among Fortune 1000 companies, according to a report by DragonGC. The law, which amended Section 102(b)(7) of the General Corporation Law (DGCL), took effect in August 2022.

The amendment expands on an existing provision that allowed for exculpation of directors, a move spurred by the 1985 landmark case Smith v. Van Gorkom, which resulted in significant financial penalties for directors who approved a hasty acquisition deal.

DragonGC’s analysis, based on data from public sources, shows that while some companies have embraced the new Officer Exculpation provision, others have hesitated. This hesitancy is partly driven by concerns raised by proxy advisory firms like Institutional Shareholder Services (ISS) and Glass Lewis.

“While ISS will vote on a case-by-case basis, Glass Lewis has adopted a more cautious stance, citing the higher compensation levels of officers compared to directors and the lack of clear demonstrable benefit for shareholders,” stated DragonGC’s report.

Despite these concerns, the report notes a significant trend in IPOs. Every Delaware corporation that went public between January and July 2024 included a charter provision indemnifying officers “to the fullest extent possible under the DGCL.”

DragonGC believes that the data analyzed provides valuable insight for boards considering adoption of Officer Exculpation, emphasizing the need for careful consideration of potential benefits and risks. The full report, detailing the data and analysis, is available at [link to full report].

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