Board of Directors

We might like to think that shareholders own and run the business, but generally they do not. The authority to manage and oversee the operation of the business on a day to day basis is vested exclusively with the board via §141. Section 141 centralizes decisionmaking authority and places it with the board of directors.

The statutory authority granted to the board by §141 lies at the heart of the what is known as the "business judgment presumption," or the “business judgment rule.” The business judgment presumption is judicial presumption that exists as an acknowledgment of the statutory authority vested in boards, and not shareholders, to run the corporation. The effect of this judicial presumption is to cause courts to defer to decisions of the board in most matters when those decisions are challenged by stockholders. 

This presumption is quite powerful and have effects beyond the courtroom. Because courts will generally abstain from intervening in disputes between stockholders and boards about most business decisions, boards will feel a great deal of latitude and independence in their decision making process. The insulation from stockholders afforded by this judicial presumption encourages boards to take business risk.

Stockholders do not generally have is the right to directly manage the day-to-day operations of the business. The general corporation law, as well as the common law, vests responsibility for corporate management and decisionmaking not with the stockholders, but rather with the corporation's board of directors.

The centrality of the board's decisionmaking power is, however, in some flux. In 2024, the Delaware General Assembly, submitting to demands from the organized corporate bar, adopted new §122(18) that upsets the historical power dynamic. The next few years will likely see a good deal of transition - for better or worse - in the understanding of the role of the board and stockholders (particularly controlling stockholders) as the market adapts to the current legal environment.