RM $875$ Spring $202450$ Point Assignment Due Thursday Jan. $25$

The Duties of the Board of Directors Related to Risk Oversight

In class lectures we have chronicled a string of court decisions originating from the

Caremark case that clarify and expand the responsibilities of the board of directors in

corporate risk management oversight. We specifically examined the Blue Bell Ice Cream

$($BB$)$ case $($Marchand v$.$ Barnhill$)$ as a recent example that defines and expands what the

board is expected to do$.$

A$.$ Differentiate the duty of loyalty from the duty of care as it applies to the BB Board

of directors. In your answer, discuss how including the duty of good faith as a part

of the duty of loyalty controls the moral hazard that results from protecting

directors with directors and officers $($D&O$)$ liability insurance. $(18$ points$).$

B$.$ In the first BB case heard by the Delaware Chancery court, BB was successful in

arguing it met the risk oversight standards detailed in the Stone v$.$ Ritter ruling.

The Stone standards continue to be required by Boards, consisting of four

requirements for risk oversight that are identified in the Caremark and Stone

rulings as essential actions that must be undertaken by the Board in fulfilling its

fiduciary duty of risk oversight. By contrast, the second BB case heard by the

Delaware Supreme Court is important in that it expanded the Board's duties to

consider compliance and oversight over mission critical risks, thus requiring them

to be included in the firm's risk oversight program if they are not included in the

risk oversight program already. By describing and comparing the risk oversight

standards defined in the Chancery court decision to the risk oversight standards

defined in the Supreme Court decision, demonstrate how the Supreme Court case

expanded the risk management oversight duties of the Board of Directors. $(32$

points$)$

NOTE: Successful completion of this assignment will require that you draw from the

articles about Blue Bell found in Canvas as well as any additional materials that you find

through your search of other reputable sources. For example, Landefeld, et al$.($see

Canvas$)$ suggest requirements for a well$-$designed compliance oversight program, but

there are many additional materials that you may also find useful. Likewise, the Stone $v.$

Ritter and Blue Bell $($Marchand v$.$ Barnhill$)$ cases have been discussed in many online

articles, as are general discussions of duty of loyalty and duty of care. It is anticipated

that you may want to go "above and beyond" the discussion in our lectures by referring to

those articles in formulating your answers. If so$,$ please cite them in your paper. To get

you started, please refer to the additional readings in the Canvas folder for this

assignment. Papers will be evaluated relative to your peers, with grades based on

correctness, completeness, conciseness, "above and beyond", and the references that you

cite in your final paper.