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BETTER OVERSIGHT THAN HINDSIGHT: Hughes v. Xiaming Hu demonstrates that directors and officers who fail to adequately oversee their company’s management expose themselves to personal liability

By Oderah C. Nwaeze

Across the United States, the Coronavirus has caused widespread devastation, marking its arrival with debilitating symptoms and tens of thousands of deaths.  The virus also is responsible for significant economic destruction, rendering 30 million Americans jobless requiring $660 billion in payroll loans, and necessitating a $2.2 trillion in stimulus package.  History likely will reveal that poorly run companies are repeat victims of the financial hardships precipitated by COVID-19.  Even without a pandemic, a company likely will fail (or suffer significant harm) if its directors and officers do not adequately oversee the company’s management.  But, there is another reason to avoid oversight failures.  As the Delaware Court of Chancery’s April 27, 2020 decision in Hughes v. Xiaming Hu et al. reinforces, directors and officers who neglect their oversight responsibilities may be personally liable for resulting harm to the company and its stockholders.

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