54 U. Louisville L. Rev. 73 (2016)
Independence of Directors in Delaware Corporate Law
Delaware courts have a clear process for handling most alleged breaches of fiduciary duty by corporate directors. First, the court determines whether a majority of the directors who approved the challenged act were “interested” or lacked “independence.” If so, the act is subject to “strict scrutiny” under the duty of loyalty, and the directors bear a heavy burden of proving the “entire fairness” of their action. In practice, directors often fail this test. If, however, a majority of these directors are found to have been disinterested, the act is reviewed under the duty of care standard and its avatar, the business judgment rule. The act will be upheld unless plaintiffs prove that a majority of the directors either were not adequately informed or acted in bad faith. In practice, this burden is almost impossible to satisfy.