Growing case law affirms board liability.
Investor lawsuits seeking to hold directors liable for failures in their oversight duties were bolstered in June by a case involving Blue Bell Creameries. Marchand v. Barnhill did not signal a change in law, but it did affirm a legal standard that boards that fail to make a good faith effort to oversee a material risk area breach their “duty of loyalty.”
Legalese aside, the Blue Bell case provides a compelling example for directors to examine. While legal standards set a high bar, Marchand demonstrates that, in certain circumstances, ignorance about poor risk management is not a defense against board liability.