The Delaware Court of Chancery denied a motion to dismiss filed by a former employee of the former employer’s claims that he breached his fiduciary duties by allowing a corporate culture to develop that condoned sexual harassment and misconduct. The company had sued, saying the former employee, a senior corporate officer, breached the fiduciary duty of oversight in failing to establish an information system that would generate the information necessary to manage the Company’s human resources function.
WHY THIS IS IMPORTANT… Many states follow Delaware law for their corporation law. The court made it clear that, in some instances, the fiduciary duties of officers are the equivalent of the directors' fiduciary duties. In this case, because the officer himself was involved in sexual harassment, the court also found the former officer breached his fiduciary duty of loyalty because those actions were taken in his interest, not the corporation's. This theory creates a new personal level of liability for corporate officers.