7th Annual National Directors & Officers Insurance ExecuSummit

This is just one of the topics at the 2011 D&O ExecuSummit. 

Ensuring Corporate Misconduct:
How Liability Insurance Undermines Shareholder Litigation

Based on the Book:



Sean J. Griffith
T.J. Maloney Professor of Business Law
Director, Corporate Law Center
Fordham Law School

Shareholder litigation and class action suits play a key role in protecting investors and regulating big businesses. But Directors and Officers liability insurance shields corporations and their managers from the financial consequences of their bad acts. I will demonstrate how corporations use insurance to avoid responsibility for corporate misconduct, dangerously undermining the impact of securities laws. I will also show that this need not be the case, arguing that insurance companies have a constructive role to play in strengthening corporate governance and articulating a set of readily implementable reforms.

Listen, Learn & Discuss:
  • The purpose of shareholder litigation is to deter corporate misconduct.
  • D&O insurance threatens to destroy the deterrence effect of shareholder litigation.
  • Unless there is some means by which the deterrence effect of shareholder litigation is preserved in the insurance product (namely, through pricing, monitoring, or selective settlement).
  • None of these means of preserving the deterrence signal in the insurance relationship currently works.
  • But certain regulatory changes (principally corporate disclosure of D&O insurance details) could make the deterrence signal more effective.


ExecuSummit.com