Caremark and Compliance: A Twenty-Year Lookback
Volume 90, No. 4, Summer 2018
By Donald C. Langevoort [PDF]

There is a lively academic debate over whether Caremark’s causal impact on the unmistakable growth curve of compliance has been overstated. After all, the holding in the decision (approving a de minimis settlement) was that the standard for holding directors of Delaware corporations liable for monetary damages under a test requiring “sustained or systematic failure . . . to exercise oversight” would be exceedingly hard for plaintiffs to prove, which is not a particularly threatening message. Plus, federal law had already been trending strongly in the direction of a robust corporate compliance obligation in many disparate fields of regulation (for example, antitrust, financial services, healthcare, and defense contracting) and—as Caremark duly noted—the Organizational Sentencing Guidelines had made the presence and quality of compliance (including board oversight) a substantial factor in the size and severity of any federal penalty for criminal wrongdoing.

Donald C. Langevoort is the Thomas Aquinas Reynolds Professor of Law at Georgetown University Law Center.