I. Introduction.

The conduct of corporate directors and officers is subject to particular scrutiny in the context of business combinations (whether friendly or hostile), executive compensation and other affiliated party transactions, allegations of illegal or improper corporate conduct, and corporate insolvency. The individuals who serve in leadership roles for corporations are fiduciaries in relation to the corporation and its owners.

Increasingly the courts are applying principals articulated in cases involving mergers and acquisitions (“M&A”) to cases involving executive compensation, perhaps because both areas often involve conflicts of interest and self-dealing or because in Delaware, where many of the cases are tried, the same judges are writing significant opinions in both areas. Director and officer fiduciary duties are generally owed to the corporation and its shareholders, but when the corporation is insolvent, the constituencies claiming to be beneficiaries of those duties expand to include the entity’s creditors.

Similar fiduciary principles are applicable to governing persons of a general or limited partnership and a limited liability company (“LLC”). These entities are often referred to as “alternative entities” in recognition that the rights and duties of their owners and governing persons can be modified by contract to greater extent than is permitted in the case of corporations.

The focus of the Congress of the United States (“U.S.”) on how corporations should be governed following corporate debacles early in the last decade led to the Sarbanes-Oxley Act of 2002 (“SOX”). SOX was intended to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws.

On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) into law. This sweeping legislation governs not only the financial services industry, but also public companies generally...