Exorcizing the omnipresent specter: The impact of substantial equity ownership by outside directors on Unocal analysis

In Unocal Corp. v. Mesa Petrolum Co., 493 A.2d 946 (Del. 1985), the Delawar e Supreme Court created a heightened standard of review for control-related decisions by target boards of directors in responding to threats to corpor ate control based on the concern that the directors could be acting primari ly in their own interests. Ten years later, in Unitrin, Inc, v. American Ge neral Corp., 651 A.2d 1361 (Del. 1995), the Delaware Supreme Court announce d that outside directors, who also hold substantial equity stakes in the ta rget corporation, will be presumed to act in their own best economic intere sts as stockholders and, absent proof to the contrary, will not be influenc ed by the prestige and perquisites of board membership: Unitrin's holding s uggests that the justification for Unocal review does not exist where a maj ority of a corporation's directors are outsiders with substantial equity st akes, and that as a result, a decision by such a board should be reviewed u nder the more deferential business judgment rule. This Article explores the viability of a potential exception to Unocal review for boards where a maj ority of the directors are outsiders with substantial equity stakes, and ex amines the potential implications of such a rule for Delaware law.