In the world of corporate governance, there are a number of common presumptions about board structure and practices. However, according to a recent paper, many of these presumptions may in fact represent corporate governance “myths.” In their September 30, 2015 paper entitled “Seven Myths of Boards of Directors” (here) Stanford Business School Professor David Larcker and Resercher Brian Tayan examine several “commonly accepted beliefs about boards of directors that are not substantiated by empirical evidence.”
Continue Reading The “Myth” of Outside Director Liability and the Critical Importance of D&O Insurance
Outside Director Accountability
Outside corporate directors named as defendants in D&O litigation are rarely required to pay settlements or judgments out of their own personal assets, as prior research has shown. But the question of how frequently outside directors are held liable is a different question from the question of whether and to what extent directors are held
Should Directors Be Held Liable More Often?
In an interesting and provocative June 7, 2011 post on the DealBook blog (here), University of Connecticut Law Professor Steven Davidoff voiced his frustration that public company directors are not held liable more often for problems at their companies. Directors, he says, “have about the same chance of being held liable for the
Surprise Director Resignations and Securities Litigation Risk
The unexpected resignation of an outside director may indicate that a company is about to experience tough times, according to a recent academic study. The research shows that a company experiencing a surprise director departure is likelier to face a number of different future adverse events.
Among other things, a company with a surprise
Outside Director Exposure for Disclosure Violations
From time to time, the SEC reiterates its view of the critical role companies’ outside directors play in safeguarding investors’ interests. Nevertheless, it has been relatively rare for SEC to pursue enforcement actions against outside directors based on an alleged failure to fulfill that role, at least in connection with disclosure violations. A recent enforcement
Court Approves Outside Directors’ Massive Settlement in Peregrine Systems Securities Suit
In what may be the largest ever outside director securities lawsuit case settlement, on July 13, 2009, Southern District of California Judge Roger R. Benitez preliminarily approved the six settling outside directors’ $55.95 million settlement of the claims pending against them in the Peregrine Systems securities class action lawsuit. The July 13 order can be
Outside Director Liability: SEC Enforcement Action
From the earliest days of the options backdating scandal, one of the recurring questions has been the potential extent of outside director liability exposure (refer, for example, here). On September 17, 2008, In a development that may also have significant implications for more recent events, the SEC filed settled options backdating-related charges against three
Outside Directors: Optimal Insurance for Changing Liability Exposures
In a recent post on his SEC Actions blog entitled “Trends in Securities Class and Derivative Actions Suggest Proactive Steps for Directors and Officers” (here), Thomas Gorman of the Porter Wright law firm reviews a number of trends that potentially could threaten the interests of directors and officers. Gorman’s blog post references the
Outside Director Exposure: A Recent Settlement Raises Alarms
Since the well-publicized settlements in the Enron and WorldCom cases, where individual directors were required to contribute toward settlement out of their own assets without recourse to indemnity or insurance, outside director exposure has been a hot topic (refer here for my prior discussion of those settlements). In addition, the SEC’s recent statements about pursuing
Outside Director Liability: Recent SEC Enforcement Action
In a recent post (here), The D & O Diary examined the SEC’s decision not to pursue an enforcement action against the outside directors of the Hollinger International and examined what this move might suggest about the potential liability and enforcement action exposure for outside directors of companies caught up in the options