Director Liability

BLACK ET AL. 58 STAN. L. REV. 1055 3/9/2006 12:21:03 AM OUTSIDE DIRECTOR LIABILITY Bernard Black,* Brian Cheffins,** and Michael Klausner*** This Article part outs the degree to which international directors of public companies are exposed to out-of-pocket liability jeopardythe risk of paying legal expenses or damages pursuant to a judgment or settlement agreement that are non risey paid by the beau monde or another(prenominal) source, or covered by directors and officers (D&O) liability insurance. Recent settlements in securities class actions involving WorldCom and Enron, in which lead plaintiffs succeeded in extracting out-of-pocket payments from open-air(prenominal) directors, have led to predictions that such payments will become common. We examine the out-of-pocket liability risk facing international directors empirically, legally, and conceptually and show that this risk is very low, far lower than more a(prenominal) commentators and board members believe , notwithstanding the WorldCom and Enron settlements. Our extensive search for instances in which away(p) directors of public companies have made out-of-pocket payments turned up thirteen cases in the last twenty-five years. Most spend a penny fact patterns that should not recur today for a federation with a state-of-the-art D&O insurance policy.

We commotion a detailed assessment of the liability risk remote directors face in trials under corporate and securities law, including settlement dynamics. We * Hayden W. rate Regents Chair for Faculty Excellence and prof of Law, University of Texas Law course; professor of Finance, McCombs School of Busi! ness, University of Texas, Austin. ** S.J. Berwin Professor of Corporate Law, Cambridge University, United Kingdom. *** Nancy and Charles Munger Professor of Business and Professor of Law, Stanford Law School. Appendix A lists the firms let in in the survey we conducted in connection with this Article. Many coterie at those firms were helpful to a degree that went well beyond answering our survey questions, and we...If you want to get a entire essay, order it on our website: OrderCustomPaper.com

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