In 1996, a Delaware Chancery court set forth what has become the corporate law standard for directors’ personal liability in cases involving a failure to exercise adequate compliance oversight. See In Re Caremark International, Inc., Derivatives Litigation. But directors in Caremark were not actually held personally liable. Nor have they been subject to personal liability in most cases applying the Caremark standard (see, e.g., Guttman v. Huang and Stone v. Ritter). Even when courts authorize recovery from directors, indemnification and insurance often will spare them from incurring any actual out-of-pocket payments. In Van Gorkum, the acquiror (Pritzker) covered most if not all of the directors’ personal liability.

Since Caremark, dozens of companies have paid billions in criminal penalties and civil damages arising, in part, from inadequate compliance procedures. Have there been any cases where directors have actually been held personally liable in connection with the oversight failures? Is the emphasis in corporate law on conduct standards for directors consistent with the actual threat of personal liability? Should federal compliance law be the focus instead?

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