Personal Liability On the Front Burner For Directors
January 28, 2022
A survey of board directors by insurance brokerage firm McGill and Partners finds that 84 percent of respondents are concerned about the personal consequences of a regulatory investigation. They are hyper-aware of the increased attention regulators are paying to their activity in recent years, and know that they risk personal liability if criminal or civil charges are filed. Directors could face fines, disqualification from board or officer roles, and in a worst-case scenario, prison. The costs involved in defending against serious charges can be huge, especially when investigations by multiple regulators in several jurisdictions snowball. Data from AIG shows that those costs have doubled in recent years to about $5.3 million per director, and guilty findings typically mean that D&O insurers are off the hook. Risk managers can expect increased scrutiny of insurance policies, and general counsel who serve as board secretaries can assume directors will pay heightened attention to documentation of business decisions at board meetings, and insist that any objections they voice are carefully documented.
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