Contracts between a corporation and a director can give rise to certain difficulties in managing expectations of a director’s obligations and responsibilities. Such contracts may create obligations that extend beyond those fiduciary duties inherent to the director position. This extension of the director’s role may increase the risk of a conflict between a director’s contractual obligations and his fiduciary duties.
In Jeter v. Revolutionwear, C.A. No. 11706-VCG (Del. Ch. July 19, 2016), the Delaware Court of Chancery examined the relationship between a director’s contractual obligations to promote his role with the corporation and particular brand of clothing, and his standard obligations as a fiduciary of the company. The case reveals the risks associated with “reverse endorsement,” or the use of the director role as a marketing tool, particularly when the subject of such reverse endorsement, or the famous individual, is already party to an exclusive endorsement agreement.
