Application of Caremark Duties to Officers
Publications
February 2023
In the landmark case In re Caremark International Inc. Derivative Litigation (1996), the Delaware Court of Chancery clarified the standard of liability for oversight failures by directors. Specifically, the Delaware Court of Chancery articulated a high pleading standard for breach of fiduciary duty claims based on an oversight failure, requiring (in general) allegations of "systematic failure of the board to exercise oversight—such as an utter failure to attempt to assure a reasonable information and reporting system exists."
On January 25, 2023, the Delaware Court of Chancery extended Caremark type duties, previously focused to corporate directors in Delaware, to officers of Delaware corporations. In particular, in In Re McDonald's Corp. S'Holder Litig., the court declined to dismiss the claims of the plaintiff alleging a breach of Caremark duties by a corporate officer, finding that corporate officers have the duty of oversight to an equal, if not greater, extent than directors. The decision creates some uncertainty as to the scope of such duty as applied to officers of a Delaware corporation.
However, the court suggested that the duty of oversight for an officer could be more limited than the duty of oversight as applied to a director. It noted that the oversight role of directors is holistic, whereas officers are often responsible for only certain areas, and thus their oversight responsibility may be limited to those areas. The breadth of oversight duties for an officer depends, however. The Court of Chancery noted, “some officers, like the CEO, have a company-wide remit. Other officers have particular areas of responsibility, and the officer’s [Caremark] duty only applies within that area[.]”
In Re McDonald’s creates a new risk profile for Delaware corporate officers. We expect corporate officers will be named more frequently as defendants in derivative complaints alleging oversight failures. Officers should remain diligent to (among other things) identify for red flag concerns, including potential misconduct perpetuated by other officers or employees. Officers (in combination with the board) should ensure the company has implemented systems for reporting material red flags and concerns. We will continue to monitor and report on further developments in this area.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
On January 25, 2023, the Delaware Court of Chancery extended Caremark type duties, previously focused to corporate directors in Delaware, to officers of Delaware corporations. In particular, in In Re McDonald's Corp. S'Holder Litig., the court declined to dismiss the claims of the plaintiff alleging a breach of Caremark duties by a corporate officer, finding that corporate officers have the duty of oversight to an equal, if not greater, extent than directors. The decision creates some uncertainty as to the scope of such duty as applied to officers of a Delaware corporation.
However, the court suggested that the duty of oversight for an officer could be more limited than the duty of oversight as applied to a director. It noted that the oversight role of directors is holistic, whereas officers are often responsible for only certain areas, and thus their oversight responsibility may be limited to those areas. The breadth of oversight duties for an officer depends, however. The Court of Chancery noted, “some officers, like the CEO, have a company-wide remit. Other officers have particular areas of responsibility, and the officer’s [Caremark] duty only applies within that area[.]”
In Re McDonald’s creates a new risk profile for Delaware corporate officers. We expect corporate officers will be named more frequently as defendants in derivative complaints alleging oversight failures. Officers should remain diligent to (among other things) identify for red flag concerns, including potential misconduct perpetuated by other officers or employees. Officers (in combination with the board) should ensure the company has implemented systems for reporting material red flags and concerns. We will continue to monitor and report on further developments in this area.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
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© 2026 Jenner & Block LLP. Attorney Advertising. Jenner & Block LLP is an Illinois Limited Liability Partnership including professional corporations. This publication, presentation, or event is not intended to provide legal advice but to provide information on legal matters and/or firm news of interest to our clients and colleagues. Readers or attendees should seek specific legal advice before taking any action with respect to matters mentioned in this publication or at this event. The attorney responsible for this communication is Brent E. Kidwell, Jenner & Block LLP, 353 N. Clark Street, Chicago, IL 60654-3456. Prior results do not guarantee a similar outcome. Jenner & Block London LLP, an affiliate of Jenner & Block LLP, is a limited liability partnership established under the laws of the State of Delaware, USA and is authorised and regulated by the Solicitors Regulation Authority with SRA number 615729. Information regarding the data we collect and the rights you have over your data can be found in our Privacy Notice. For further inquiries, please contact dataprotection@jenner.com.
Publications
February 2023
In the landmark case In re Caremark International Inc. Derivative Litigation (1996), the Delaware Court of Chancery clarified the standard of liability for oversight failures by directors. Specifically, the Delaware Court of Chancery articulated a high pleading standard for breach of fiduciary duty claims based on an oversight failure, requiring (in general) allegations of "systematic failure of the board to exercise oversight—such as an utter failure to attempt to assure a reasonable information and reporting system exists."
On January 25, 2023, the Delaware Court of Chancery extended Caremark type duties, previously focused to corporate directors in Delaware, to officers of Delaware corporations. In particular, in In Re McDonald's Corp. S'Holder Litig., the court declined to dismiss the claims of the plaintiff alleging a breach of Caremark duties by a corporate officer, finding that corporate officers have the duty of oversight to an equal, if not greater, extent than directors. The decision creates some uncertainty as to the scope of such duty as applied to officers of a Delaware corporation.
However, the court suggested that the duty of oversight for an officer could be more limited than the duty of oversight as applied to a director. It noted that the oversight role of directors is holistic, whereas officers are often responsible for only certain areas, and thus their oversight responsibility may be limited to those areas. The breadth of oversight duties for an officer depends, however. The Court of Chancery noted, “some officers, like the CEO, have a company-wide remit. Other officers have particular areas of responsibility, and the officer’s [Caremark] duty only applies within that area[.]”
In Re McDonald’s creates a new risk profile for Delaware corporate officers. We expect corporate officers will be named more frequently as defendants in derivative complaints alleging oversight failures. Officers should remain diligent to (among other things) identify for red flag concerns, including potential misconduct perpetuated by other officers or employees. Officers (in combination with the board) should ensure the company has implemented systems for reporting material red flags and concerns. We will continue to monitor and report on further developments in this area.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
On January 25, 2023, the Delaware Court of Chancery extended Caremark type duties, previously focused to corporate directors in Delaware, to officers of Delaware corporations. In particular, in In Re McDonald's Corp. S'Holder Litig., the court declined to dismiss the claims of the plaintiff alleging a breach of Caremark duties by a corporate officer, finding that corporate officers have the duty of oversight to an equal, if not greater, extent than directors. The decision creates some uncertainty as to the scope of such duty as applied to officers of a Delaware corporation.
However, the court suggested that the duty of oversight for an officer could be more limited than the duty of oversight as applied to a director. It noted that the oversight role of directors is holistic, whereas officers are often responsible for only certain areas, and thus their oversight responsibility may be limited to those areas. The breadth of oversight duties for an officer depends, however. The Court of Chancery noted, “some officers, like the CEO, have a company-wide remit. Other officers have particular areas of responsibility, and the officer’s [Caremark] duty only applies within that area[.]”
In Re McDonald’s creates a new risk profile for Delaware corporate officers. We expect corporate officers will be named more frequently as defendants in derivative complaints alleging oversight failures. Officers should remain diligent to (among other things) identify for red flag concerns, including potential misconduct perpetuated by other officers or employees. Officers (in combination with the board) should ensure the company has implemented systems for reporting material red flags and concerns. We will continue to monitor and report on further developments in this area.
This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。
Related Articles
© 2026 Jenner & Block LLP. Attorney Advertising. Jenner & Block LLP is an Illinois Limited Liability Partnership including professional corporations. This publication, presentation, or event is not intended to provide legal advice but to provide information on legal matters and/or firm news of interest to our clients and colleagues. Readers or attendees should seek specific legal advice before taking any action with respect to matters mentioned in this publication or at this event. The attorney responsible for this communication is Brent E. Kidwell, Jenner & Block LLP, 353 N. Clark Street, Chicago, IL 60654-3456. Prior results do not guarantee a similar outcome. Jenner & Block London LLP, an affiliate of Jenner & Block LLP, is a limited liability partnership established under the laws of the State of Delaware, USA and is authorised and regulated by the Solicitors Regulation Authority with SRA number 615729. Information regarding the data we collect and the rights you have over your data can be found in our Privacy Notice. For further inquiries, please contact dataprotection@jenner.com.
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