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When considering the purpose of D&O
coverage, keep in mind the three basic duties
all directors owe to their corporations:
- Loyalty — the
director must put the interest of the
corporation above their own;
- Obedience — the
director’s actions must conform
to the corporate charter and bylaws;
- Diligence — management
of the corporation must be done
in an expedient and knowledgeable
manner*
One of the best risk management actions
you can take to address these issues is to
review
your current corporate workflows, procedures,
and enforcement mechanisms. Are you leaving
loopholes that might lead to claims? Do you
have procedures on the books that
are either being ignored or simply not
enforced? Nearly every wrongdoing Enron
is accused
of was specifically addressed and/or
prohibited by an Enron corporate policy or
rule. If
an employee becomes aware of a potential
problem, are they fully aware of (and
encouraged to use) the proper channels for
reporting
the situation to the proper parties?
Don’t
let the everyday pace of your business
lead your directors into actions that could
mire
your business in the D&O swamps.
For more risk management ideas that
might keep
your path on higher ground, contact
our staff professionals today.
Contact
Us for a convenient time to review your
situation and needs.
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