One of a director’s primary responsibilities is providing oversight of management and ensuring officers act in a manner consistent with their fiduciary duties. But what about when a fellow director fails to meet that same standard? Or, worse yet, actively seeks to harm the same company they oversee as a director?
When interim governance measures fail, options for the other directors are more limited than one might assume. Generally speaking, stockholders—and stockholders alone—hold the power to remove rogue directors. But that doesn’t mean the board has no role to play. An overview of Delaware law serves as a helpful reminder of what can (or cannot) be done in these situations. And a recent Delaware case overturning a director’s removal provides some helpful guidance on pitfalls to avoid.
Only Stockholders Have the Power to Remove Directors. Under Delaware law, replacing or removing a sitting director requires a stockholder vote. In other words, directors cannot unilaterally remove other directors from office. This holds true regardless of the reasons for removal. Even if a majority of directors concludes that another director poses an immediate and irreparable harm to the company—and the evidence of that misconduct is clear and compelling—a stockholder vote is still required to remove the director.
The Board Can Initiate a Stockholder Vote and Present a Case to the Stockholders.That is not to say a board has no role in removing directors. Directors still have fiduciary obligations to act in the best interests of the company, including in addressing misconduct by other directors. That could mean causing the company to file suit against the wayward director. But it can also include less adversarial (and less expensive) measures, like calling for a special meeting of stockholders to vote on whether to remove the director. 8 Del. C. § 141(k). Directors at the meeting can explain to stockholders the reasons for the vote and basis for the allegations of misconduct. And, absent a contrary provision in the charter or bylaws, a vacancy caused by the removal can be filled by the remaining directors. 8 Del. C. § 223(a)(1). So while the ultimate decision of whether to remove lies with stockholders, directors still play a critical role in effectuating removal.
Stockholder Votes on Removal Must Be Fully Informed. If a board does seek stockholder approval of a director removal, it should be mindful of the company’s disclosure obligations. A recent decision in the Delaware Court of Chancery illustrates this principle. In Dalby v. Kastner, C.A. No. 2025-0136-NAC (Del. Ch. Aug. 29, 2025), the court overturned the removal of a director where material facts about behind-the-scenes machinations leading to the director’s removal were not disclosed to stockholders. Specifically, the board failed to disclose to stockholders that management and the company’s outside counsel played a much larger role in pushing for the director’s removal than previously disclosed. In fact, disclosures suggested a neutral stockholder was calling for removal, when, in reality, the stockholder was merely a front for a board faction and the company’s management. The court ultimately concluded that this sleight of hand could have been material to stockholders and found the removal invalid, notwithstanding stockholder approval.
Do Stockholders Need “Cause” to Remove a Director? Another oft-asked question in these circumstances is what, if anything, needs to be established or proven in order to justify the removal of a director by stockholders. In most cases, the answer is nothing. Directors of most companies can be removed by stockholders at any time, for any reason, with or without cause. There are only two limited exceptions to this rule. See DGCL § 141(k). First, if a board is classified, directors are removable only for cause unless the certificate of incorporation provides otherwise. Second, for corporations with cumulative voting, removal without cause is limited to situations in which a majority of stockholders with the ability to elect the director at issue approves the removal. Absent classified boards or cumulative voting, however, Delaware courts have repeatedly invalidated corporate bylaws or charter provisions that purport to restrict removal to “for cause.” See, e.g., In re Vaalco Energy, Inc. Stockholder Litig., C.A. No. 11775.
Are There Any Other Ways to Remove a Bad-Actor Director? There is one limited exception to the general rule that stockholder approval is necessary to remove a director. If a director commits a felony in connection with their duties, or is found by a court to have breached their fiduciary duty of loyalty to the company, a corporation (or any stockholder derivatively on behalf of the corporation) can initiate a summary proceeding in the Delaware Court of Chancery to have the director removed to avoid irreparable harm. Of course, this only applies if there has been a prior conviction or judgment against the director, so, while a powerful tool, its applicability is fairly limited.
Practice Points for Addressing Director Removal:
- Review the company’s governing documents to develop a plan for removal. This includes ascertaining the company’s particular requirements for special meetings, notice, written consents, and how vacancies are filled. These provisions will often dictate the mechanics and pace of the removal process.
- Determine whether cause is required. For example, if a board is classified or if cumulative voting applies, seek guidance on whether “cause” is required and what must be shown to establish “cause.”
- Be mindful of the company’s disclosure obligations in connection with a stockholder vote on removal. If company management or counsel is involved, make sure the scope of their involvement is appropriate and disclosed to stockholders.
- Removal can be a drastic remedy. Before proceeding, evaluate alternatives. In many cases, the mere threat of going to stockholders with the alleged misconduct or a lawsuit over a breach of fiduciary duty is enough to convince a director to step down. The board may also consider interim governance measures, like a special committee, to investigate and address the alleged malfeasance.
Finally, the company and its counsel would be wise to review the company’s governing documents to ensure they remain consistent with Delaware law on these issues.
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