Why Do This Work

We are living in increasingly turbulent and uncertain times. Corporate directors and officers are exposed to a level of risk that previous generations of leaders had never experienced or could have anticipated. As corporate fiduciaries, directors and officers are, on many levels, ethically and legally linked to their peers’ decisions and behavior; paradoxically, they stand alone to navigate the exposure they collectively bear. In this hyper-transparent, hyper-connected world, this can have a dramatic impact on careers, reputations, and legacies.

The Changing Corporate Landscape

The corporate landscape is continually changing, and while we are not providing legal advice, we advocate for an ongoing awareness of the changing legal landscape that will impact you as a senior corporate executive. The following are a few key points to possibly discuss with your attorney.

• The 2020 case “Teamsters Local 443 Health Services & Insurance Plan v. Chou” is notably associated with the McDonald’s litigation involving fiduciary duties of corporate officers. This case is groundbreaking because it’s the first time the Delaware Court of Chancery recognized that corporate officers, not just directors, have a legal duty of oversight. This expanded interpretation of fiduciary responsibilities is a significant development in corporate law because it underscores the potential for corporate officers to be held liable for failures in overseeing company culture and practices, in this instance, related to allegations of sexual harassment and misconduct within the company.
• In Delaware corporate law, directors can be exculpated from monetary liability for breaches of their duty of care under Section 102(b)(7) of the Delaware General Corporation Law. However, this exculpation does not extend to officers, meaning that officers can be held personally liable for such breaches. This distinction creates a higher potential liability risk for officers than directors in certain situations. Essentially, this means that corporate officers remain more exposed to personal liability for breaches of their duty of care than directors. Section 102(b)(7) of the Delaware General Corporation Law has been a longstanding aspect of Delaware corporate governance. However, what is relatively recent is the increased focus and scrutiny on officer liability, especially in the context of class action merger litigations and other legal actions by stockholders.
• Delaware corporate law significantly impacts other jurisdictions in the United States because many companies choose to incorporate in Delaware due to its well-developed and business-friendly legal framework. As a result, Delaware’s legal precedents and statutes, particularly in corporate governance and fiduciary responsibilities, often influence court decisions in other states. Jurisdictions outside Delaware may look to Delaware law as a guide or benchmark when dealing with corporate law issues, especially if their own precedents and statutes need to be developed in these areas.
• In October 2021, Deputy Attorney General Lisa O. Monaco, of the Department of Justice announced steps to strengthen their corporate criminal enforcement policies and practices with respect to individual accountability, and the treatment of a corporation’ s prior misconduct. (Memorandum from Deputy Attorney General Lisa O. Monaco, “Corporate Crime Advisory Group and Initial Revisions to Corporate Criminal Enforcement Policies,” Oct. 28, 2021) This was the Departments signal to corporate officers that the Department’s increased priority in corporate criminal matters is to hold accountable the individuals who commit and profit from corporate crime. This reinforced the Departments commitment to the Yates Memo of 2015. (Deputy Attorney General Sally Quillian Yates, “Individual Accountability for Corporate Wrongdoing,” Sept. 9, 2015)
• The Monaco Memo initiates two key elements. First for corporations to receive any consideration for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority, and provide to the Department all nonprivileged information relating to that misconduct. While the intent is noble, this can create a dynamic where the corporation is motivated to scapegoat a single corporate officer to secure the considerations in lowering their Culpability Score. The second key element is an increased review of the corporation’s record of past misconduct-including violations of criminal laws, civil laws, or regulatory rules which can be used to indicate whether the company lacks the appropriate internal controls and corporate culture to disincentivize criminal activity, and whether any proposed remediation or compliance programs, if implemented, will succeed.
• Remember – Historically, many directors and officers have heavily relied on D&O Liability insurance to transfer risk as their primary vehicle for protection. However, overreliance on this insurance can lead to a complacent attitude toward identifying and addressing various threats and hazards.
• Remember – Andrew Fastow was named CFO of the Year in 2000, and the Enron scandal unfolded in 2001. Fastow played a significant role in the financial maneuvers that ultimately led to Enron’s downfall. Fastow was awarded CFO of the year for the accounting practices that quickly ended his career and took down Enron. The key to this story is to realize that many executives do not know they are engaging in criminal behavior until after the fact. The blind spots of the moment are always easily illuminated with the clarity of hindsight of an investigation.
• Remember – No one is immune from errors, missteps, or bad behavior. On January 22, 2024, Vikram Luthar, Archer-Daniels-Midland Co. (ADM) ‘s Chief Financial Officer (CFO) of Archer-Daniels-Midland Co. (ADM), was placed on administrative leave amidst an accounting investigation. This investigation resulted in ADM losing approximately $8.8 billion in a single afternoon. The key to this story is that despite all the state-of-the-art resources that ADM has available to prevent criminal activity, they still had a potential breach.

Why Choose Resolute Integrity

Resolute provides a prudent, good-faith structure grounded in the principle that corporate risk is fundamentally rooted in interpersonal behavioral dynamics. Our approach builds upon your existing risk management and ethics programs while bypassing many of the limitations of programs built solely on a compliance-first foundation. For corporations seeking further resources to manage risk and demonstrate responsible actions to their shareholders and the judiciary, Resolute offers a solution.

As independent third-party risk resources, we are unencumbered by the politics and dynamics of corporate life. This independence allows us to facilitate a level of engagement that is not possible with in-house leaders and craft tailored strategies specific to each corporation’s needs and unique behavioral nuances.

Our approach empowers corporate officers to address their blind spots, group dynamics, drivers of fear and greed, and cognitive biases and distortions that can bring down even the mightiest of corporate titans if they go unchecked.

We provide a dynamic model and comprehensive maps to navigate the challenges in today’s turbulent corporate landscape. These tools help shift destructive historical patterns and address current outstanding issues effectively. Additionally, we help ensure the integrity of this process by creating clear and timely documentation, which serves as a record for future consideration.

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