For nearly 40 years, Delaware Corporations have been permitted to adopt corporate charter provisions exculpated their directors from liability. Effective August 1, 2022, Section 102(b)(7) of the Delaware General Corporations Law (DGCL) was amended to permit Delaware corporations to adopt charter provisions exculpating officers, in order to provide officers with protection from liability for monetary damages similar to the protection available to directors. In the time since the officer exculpation amendment provision went into effect, many Delaware corporations have adopted officer exculpation provisions; the record so far suggest that these provisions generally enjoy significant shareholder support. As discussed below, these developments should also be of interest to D&O insurance professionals.

What the statutory officer exculpation amendment does is permit Delaware corporations to take steps to adopt officer exculpation provision in their corporate charters through a shareholder vote. The officers eligible for exculpation, if implemented by the corporation, include the president, chief executive officer, chief operating officer, chief financial officer, chief legal officer, controller, treasurer, or chief accounting officer, the company’s most highly compensation executive officers as identified in SEC filings and certain other officers who have consented (or deemed to have consented) to be identified as an officer and to service of process.

The statutory corporate officer amendments permit the adoption of provisions exculpating corporate officers on the same basis as directors; that is, as summarized in a post on the Harvard Law School Forum on Corporate Governance, “for all fiduciary duty claims other than breaches of the duty of loyalty, intentional misconduct or knowing violations of the law.” There is also an additional exception for officer exculpation for claims against the officer “in any action by or in the right of the corporation.” This means that while officers can be exculpated from personal liability for monetary damages to stockholders for breaches of their fiduciary duty of care, they would still be subject to liability of claims brought by or in the right of the corporation, including derivative claims.

Companies that are about to go public through an IPO or spin-off transaction can incorporate the officer exculpation provisions as part of the new company’s certificate of incorporation. In order for current publicly traded companies to adopt an officer exculpation provision, the companies must amend their charters through a board-sponsored proposal to be voted on by shareholders at a shareholder meeting, in conjunction with disclosures in the companies’ proxy statements.

For a more thorough overview of officer exculpation and how the officer exculpation amendments came to be adopted in Delaware, please see the guest post that appeared on this blog shortly after the statutory provisions became effective (here).

Now that a little bit of time has passed since the statutory amendments went into effect, we have a little bit of a track record showing how initiatives to adopt officer exculpatory provisions have fared. A February 6, 2024, memo from the Meyer Brown law firm (here) reported that as of the end of January 2024, 271 public companies including in any of the major indices (S&P 500, etc.) have held stockholder votes to approve officer exculpation amendments, with as many as 85% of such proposals being approved.

Of the companies that have approved amendments, a majority are smaller companies (under $2 billion market capitalization). Large cap companies (market cap over $10 billion) were only a small percentage (15%) of all companies that have adopted proposals. Of the 323 Delaware corporations in the S&P 500, only 29 have sought approval of officer exculpation amendments, with 28 of them having been successful. In the one where the vote failed, 64% of if its voting shares outstanding voted in favor of the amendment, which was just short of the 2/3 majority required under its bylaws.

Of the relatively small number of companies where proposed shareholder amendments did not pass, shareholder turnout for the vote appears to have been a significant factor. As the law memo to which I linked above puts it, “because a passing vote typically requires approval of a majority of the total voting shares outstanding (or a supermajority threshold if required under a corporation’s certificate of incorporation) stockholder turnout can prove to be an important factor.”  

There have been legal challenges to proposed amendments, but largely on procedural grounds. For example, non-voting shareholders of Fox Corporation and of Snap challenged the companies adoption of officer exculpation amendments, on their argument that the separate non-voting share class was also entitled to vote on the measure, given that the amendment would limit the power of non-voting classes of stock to sue officers. In a January 2024 decision, the Delaware Supreme Court affirmed the lower court’s decision that officer exculpation amendments generally do not require a separate class vote of shareholders.


Given that a number of Delaware companies have already adopted officer exculpation provisions, as well as given the high passage rate and general shareholder support, it seems likely that other companies will now move forward with their own officer exculpation amendments. As the law firm memo puts it, “we expect that the results obtained by the companies that have been the early adopters of officer exculpation will encourage more companies to propose such amendments in the coming proxy season.”

Because officer exculpation provisions seem to reduce the likelihood of officer liability, many companies assuming their adoption of officer exculpation amendments would be viewed favorably by their D&O insurers. And that does seem to be the case. A company’s adoption of an office exculpation provision will undoubtedly be viewed as a positive underwriting factor by D&O insurance underwriters, as they would regard any affirmative risk protection measure as a positive.

However, many companies also assume that their adoption of officer exculpation amendments will result in a discount on their D&O insurance premiums, and that is unfortunately not likely to be the case. In a time of generally falling insurance premiums, the insurers have little room to make further downward adjustments. It is also worth remembering that director exculpation provisions have long been widespread; it seems likely that the office exculpation provisions will soon because widespread as well, providing less basis on which to differentiate premiums for companies that have adopted an office exculpation amendment.

Moreover, determining how much of a discount to apply would be challenging. At this point, there is little case law showing the extent to which the exculpation provisions are translating into favorable case outcomes and dismissals, or showing whether cases that might other wise be filed are remaining unfiled.  

In any event, it seems to be the case that the adoption of officer exculpation amendments would be a good choice for most companies, and with the passage of time, company adoption of officer exculpation provisions seems likely to become more widespread, particularly among smaller companies.

For a good roadmap of the steps companies contemplating adopting an officer exculpation amendment to their corporate charter should take, please see the January 24, 2024 post by Lenin Lopez on Woodruff Sawyer’s D&O Notebook blog (here).