Thursday, July 06, 2006


Governance Update: Personal Liability on the Rise?

Voltaire once wrote "No snowflake in an avalanche ever feels responsible". In the aftermath of some of the more "infamous" corporate scandals, one wonders if this is what the french philosopher had in mind. Unfortunately, for the directors seeking refuge in the opinions of others, hiding may become more difficult.

A recent article in Canadian Underwriter describes several trends that seem to be gaining ground: (a) plaintiffs' demand that directors personally contribute in the event of litigation-related payouts and (b) attempts by insurance underwriters to rescind Directors & Officers coverage "upon learning of fraudulently-reported financial statements".

At the same time, KPMG's Integrity Survey 2005-2006 suggest that things are improving. "Although the level of observed misconduct has remained constant, employees reported that
the conditions that facilitate management's ability to prevent, detect, and respond to fraud and misconduct have improved since 2000. For example, pressure to engage in misconduct is down, and confidence in reporting concerns to management is up."

In a related article, attendance at Directors College was way up this year, with a star-studded roster of speakers addressing many topics including several sessions about D&O insurance.
posted by Susan Mangiero at 7/06/2006 12:49:00 AM