D&O RISK MANAGEMENT STRATEGIES
RC: There is little doubt that directors and officers (D&Os) around the world find themselves in a challenging business environment. In your opinion, what are the key personal risks faced by corporate leaders today?
Pryce: There is a vast array of different laws from different jurisdictions that directors now have to comply with. While there has been an attempt to harmonise some of the Australian laws that impose duties upon directors by the Council of Australian Governments, it has been slow going and around 700 laws imposing personal liability upon directors in Australia remain across the various jurisdictions. As companies increase their footprint overseas, the vast scale of the legal duties a director must comply with is a constant and relevant concern for directors. It is a tall order for directors to be aware of the legal duties in each country that the company operates in and to then develop and instil a risk management strategy to account for these laws. Many companies are turning to their D&O insurers to provide them with a centrally controlled D&O policy in Australia, but also seeking certainty through asking their D&O insurer to issue policies in their other countries of operation so that there is a higher level of certainty that their D&O insurance program is designed for the peculiarities of that legal framework.
Hull: Frequency of litigation against directors and officers continues its upward trend. As such, corporate leaders are exposed to significant personal financial and reputation risk. Consider the extreme example of Angelo R. Mozilo, the former chairman of the board and chief executive officer of Countrywide Financial Corporation.
Jan-Mar 2013 Issue
Berkeley Research Group
Holland & Knight