Summary |
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 many illegal acts, as evidenced by the recent Enron scandal and many of our corporate financial meltdowns. Ensuring Corporate Misconduct demonstrates for the first time how corporations can use insurance to avoid responsibility for corporate misconduct, undermining the impact of securities laws.
It has long been standard practice for all large companies to take out directors’ and officers’ insurance-in doing so, they protect their officers from being personally liable for lawsuits. At the same time, this insurance also applies to the companies themselves. This arrangement makes the company the primary defendant in most cases, which leads to a host of problems, especially in terms of protecting investors.
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