ANALYSIS: Chancery Ruling Could Encourage Toxic Culture Cleanup

The viability of Caremark claims (claims alleging breach of oversight duties by corporate fiduciaries) has vexed Delaware courts since the eponymous 1996 opinion. In January, the Delaware Court of Chancery allowed a shareholder Caremark suit to proceed on the grounds that the plaintiffs adequately alleged fiduciary breaches of oversight duties against a corporation’s directors and the CEO.

By advancing a Caremark claim undergirded by sexual misconduct (a rare basis for these lawsuits, which are famously daunting to prove in their own right), the court signaled that toxic work environments and fiduciary attempts to paper over poisonous corporate culture are ...