Among the recently enacted changes to the Delaware General Corporation Law (DGCL) that were described in our August 1, 2022 Client Alert are some that provide more flexibility for boards of directors of Delaware corporations to delegate to management the authority to grant equity awards (for this article, this will be referred to as a management equity grant committee). These changes, which were effective August 1, 2022, make it possible for a management equity grant committee to make more decisions regarding the structure of equity awards granted by the management equity grant committee. Before approving any delegation to a management equity grant committee, boards should carefully consider the corporate governance implications of such a delegation; as a reminder, many issues related to the backdating of stock options 10 or more years ago involved situations where a delegate was making the stock option grants, rather than the board or a committee of the board.

Background. A fundamental duty of the board of a Delaware corporation is to approve the issuance of capital stock of the corporation, including the creation and issuance of rights or options to acquire shares of capital stock. Such issuances are subject to both fiduciary considerations and the technical requirements of the Delaware statutes, which include who (or what corporate body) is permitted to authorize the issuance of capital stock, or rights or options to acquire capital stock and consideration required to...

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