A recent decision from the Delaware Supreme Court issued on Dec. 5, 2016, Sandys v. Pincus, — A.3d —- C.A. No. 9512-CB (Del. Dec. 5, 2016), highlights the potential impact that directors’ business and financial arrangements can have on their independence in the context of considering shareholder demands on the board.
In Sandys, the plaintiff asserted derivative claims against the senior executives and directors at Zynga Inc., alleging that top Zynga insiders breached their fiduciary duties by selling shares while in possession of confidential information regarding Zynga’s soon-to-be announced earnings. The plaintiff also asserted a duty of loyalty claim against the directors who approved the insider sales despite the company’s standing rule preventing sales by insiders until three days after an earnings announcement.
