Two recent, one a bit older. The CEO of El Paso Corp. was the company’s negotiator in a proposed sale of the business to Kinder Morgan Inc. No problem in that; it’s what CEOs do. Where the problem lay was in the CEO’s pre-closing discussions with Kinder Morgan about a side deal which would involve a buy-out by El Paso management (including the CEO) of a business unit that Kinder Morgan intended to sell off. Chancellor Strine took a very dim view of this obvious but undisclosed conflict of interest: it was clearly in the CEO’s interest not to maximise the the value of El Paso – and by extension the object of the proposed management buy-out. Goldman Sachs, which advised El Paso but had a significant stake in Kinder Morgan, also takes a judicial drubbing. In the end, though, this didn’t amount to grounds for the odd injunction requested, which would have allowed El Paso to shop itself in parts (in contravention of the merger agreement) but then require Kinder Morgan to close if no better deal emerged: In re El Paso Corp Shareholder Litigation, 2012 Del Ch LEXIS 46.

More CEO conflicts in Re Delphi Financial Group Shareholder Litigation, 2012 Del Ch LEXIS 45, where the chap in question failed to disclose to the board that he intended to seek a control premium for the class of shares he alone held. There were also allegations that he was negotiating side deals with the buyer with respect to businesses of his own that provided services to the company. In spite of ‘troubling’ breaches of duty, it was nevertheless likely that the CEO had an incentive to maximise the sale price of the company: the remedy would be damages for breach not an injunction preventing the deal.

See also In re Del Monte Foods Co. Shareholders Litigation, 25 A.3d 813 (Del Ch 2010), where a financial adviser in an M&A deal was criticised for having a significant equity investment in the purchaser.