Friday, March 24, 2006
Noses In, Fingers Out: Directors' Duties Under Delaware Law
Highlights of the October 2005 Directors' College sponsored by the University of Delaware and PWC are available online here. Speekers included Charles Holiday (Chairman and CEO of DuPont), Myron Steele (Chief Justice of the Delaware Supreme Court), and Donald Nicolaisen (Chief Accountant of the SEC).
As the phrase "noses in, fingers out" indicates, good directors will ask probing questions of management. However, directors need to let managers manage. Holliday discussed how this concept is applied at the board level.
Chief Justice Steele noted that the court's focus is hot issues such as director independence, executive compensation and stock option plans. He noted that Delaware will continue to apply the business judgement rule. Only where there are true questions of independence or a director's personal interest in a transaction would the stricter "intrinsic fairness" test apply.
Nicolaisen discussed how investors have been affected by financial scandals in recent years. He also discussed the convergence of international accounting standards and the cooperation of the FASB and SEC with the IASB and European and Asian regulators.