Now that you are on the board, you’ve got a say in how the company is run, an ability to draw up strategy, and build a brighter corporate future. But, whether the company is large or small, can you really be sure that you know about every action taken by company staff? Whether you do or not, you can be held personally liable for the company’s failures.
Mistakes made by employees that could wipe you out financially range from failure to meet tax and environmental regulations, or to ensure that all corporate data is securely held and there are no data breaches. Bob from accounting leaves the office with a memory stick and looses it on the train – and as a board member it could be you that is held to account.
Claims arise internally from trustees, subsidiaries, the company itself, and whistleblowers. Externally, creditors, shareholders, customers, suppliers, competitors, tax authorities, government regulators or even former employees can bring claims, and insurance giant Allianz Global reports that there is growing trend for cases against companies to be resolved more slowly, which even if they are dismissed, means lengthier legal proceedings, increased defence costs and higher settlement expectations in jurisdictions ranging from the UK and US, to Hong Kong and Singapore and Australia.
According to Chin Feng, CEO of Hong Kong & Greater China at Allianz Global Corporate & Specialty, a large driver of executive liability and D&O claims in Asia has been exposure to securities and debt listings. “The average securities class action case in the US can take between three and six years to complete while legal defence costs between US $10 million to up to $100 million for the largest cases. Even companies not listed or based in the US, can be exposed to US class action law suits if they have ever raised debt in US markets,” he added.
Gaining a seat on the board is an exciting opportunity, but it’s a responsibility that comes with risks. Protect yourself with Directors and Officers insurance – contact your trusted advisor at Trusted Union for more information.
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