Directors and Officers Liability

A directors and officer (D&O) liability lawsuit is a perennial threat for corporations, large and small. In addition to potentially huge litigation damages, expenses and distractions, exposure fears can inhibit decision making and result in the loss of significant corporate opportunities. Although a comprehensive executive liability insurance policy will go a long way toward reducing these exposures, today’s directors and officers face risks greater than insurance coverage alone can address.

The best risk management strategy combines several techniques, including quality D&O liability insurance, sound corporate governance practices and expert legal assistance. In addition to the clear risk reduction benefits, proactive management of D&O exposures can improve a company’s ability to recruit talented management, enhance the quality of corporate decision-making and contain the cost of D&O liability insurance premiums.

The fundamental goal of any D&O loss-prevention program is to sensitize the company’s executives to the fact that virtually everything they do creates the potential for second-guessing and perhaps claims by persons adversely affected by their actions and decisions. Once that mindset exists, the executives will naturally use caution, which is the single most important element of any loss-control program.

Superior corporate governance occurs only if a company-wide commitment to excellence and discipline exists. Board members and senior officers must be ever mindful that their job is to serve the interests of the corporation and its various constituencies. Executive decisions should be thoughtful, informed, made by disinterested persons and fully documented. When appropriate, outside expertise should be sought. Good corporate governance is good business. Although an investment of time, energy and resources is necessary to achieve an exemplary corporate governance program, the tangible and intangible rewards from a successful program will far exceed that modest investment.

Learn more about developing a successful corporate governance program.

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