Board Authority Prevails Over Performance In CEO Removal

On April 20, 2026, the Delaware Court of Chancery, following a post-trial decision, upheld a board decision to suspend and terminate a long-tenured and highly successful CEO, applying the business judgment rule and rejecting claims that the directors acted in bad faith or under improper stockholder influence. The court in DSM HoldCo, Inc. v. Demoulas emphasized that directors retain broad authority over executive leadership—even in the face of strong financial performance—and may act on governance concerns and credible risks without waiting for harm to materialize.

Background

As described in the court’s opinion, the dispute arose from a governance conflict at Market Basket, a family-owned New England supermarket chain. It unfolded against a backdrop of unusually public and contentious dynamics, including prior episodes of employee unrest and intra-family conflict, that heightened the stakes of the board’s oversight efforts and informed its assessment of risk.