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 leave 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 resolving power 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 outdoor(prenominal) directors, have led to predictions that such payments will become common. We try the out-of-pocket liability risk facing international directors empirically, legally, and conceptually and show that this risk is very low, far lower than many an(prenominal) a(prenominal) commentators and boar d members believe, notwithstanding the WorldCom and Enron settlements. Our extensive search for instances in which out-of-door directors of public companies have made out-of-pocket payments turned up thirteen cases in the last twenty-five years. Most imply fact patterns that should not recur today for a lodge with a state-of-the-art D&O insurance policy.

We go a detailed assessment of the liability risk away directors face in trials under corporate and securities law, including settlement dynamics. We * Hayden W. honk Regents Chair for Faculty Excellence and prof of Law, University of Texas Law vilify; pro f of Finance, McCombs School of Business, Un! iversity 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 allow in the survey we conducted in connection with this Article. Many hoi polloi at those firms were helpful to a degree that went well beyond answering our survey questions, and we...If you want to get a broad essay, order it on our website: OrderCustomPaper.com

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