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Court Of Chancery Explores Risk Management Duties

In re General Motors Company Derivative Litigation, C.A. 9627-VCG (June 26, 2015)

This decision involves the currently hot topic of the extent of a board of directors’ duty to properly assess corporate risks and act to prevent loss.

As this decision notes, only if a Board is consciously failing to follow its duty is the Board potentially liable for a failure to monitor risk and the resulting harm to the corporation. That in turn requires some sort of warning to the Board of a real, specific problem, the so-called “red flag.”  A generally weak risk management process is just not enough alone to hold the Board responsible.

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