For almost all U.S. public companies, COVID-19 has created unique and very profound challenges. For the board of directors, which is charged with overseeing the short-term and long-term health of the corporation and its business prospects, navigating the COVID-19 crisis requires careful consideration of a range of issues under these unprecedented circumstances. This post outlines several corporate governance issues for directors to consider as their companies respond to the challenges and risks posed by the COVID-19 pandemic.

Monitoring and Oversight Responsibilities of Directors

As a general matter, directors of a Delaware corporation have a responsibility to oversee the business and affairs of the corporation, which requires that directors make a good faith effort to put in place a reasonable board-level system of monitoring and reporting. The Delaware courts, in a line of cases beginning with In re Caremark Int’l Inc. Derivative Litig., have found that a failure of director oversight would occur (1) if directors failed to implement any corporate reporting or information systems or controls or (2) if such a system or controls were implemented, the directors consciously failed to monitor or oversee the company’s operations, thus removing themselves from being informed of material risks or problems requiring their attention.

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