Blog : BOARD TALK
|Posted on October 7, 2015 at 10:30 AM|
Board members be warned. It is time to make sure you understand the extent of your individual liability at a time when differences in board structure and complex supply chains complicate the pitcture across Europe. D&O insurance claims are rising and there is talk of 'criminal liability' in the air.
Today sees the launch of a pan-European report offering guidance and insight into the changing environment shaping European directors’ duties and liabilities. It has been produced by the European Confederation of Directors’ Associations (ecoDa) with AIG, the global insurance group.
The impact of a new regulatory environment and the "political scrutiny of boards" has led to an increase in the risks and potential liabilities faced by individual directors, it says. The impact of this new environment is being reflected in the rising number of directors’ and officers’ (D&O) insurance claims.
Differences in board structure across Europe that affect liability are set out in the report, which provides a number of useful cross-border and national case studies in illustration.
It also analyses how D&O insurance can help board members manage these risks, covering a gamut of potential horrors - from shareholder activism to criminal liability. (It has been 'co-produced' by AIG).
Roger Barker, director of Corporate Governance for the UK's Institute of Directors and Chair of the ecoDa/AIG Working Group describes the report as "a wake-up call for professional board members."
"Board members have to ensure that they have the appropriate skills and knowledge before considering a non-executive position. The assumption that a director can’t be liable if he or she acted in good faith is changing. It’s no longer going to be a reasonable defence for a European board member to say ‘I didn’t intend for this to happen’. Instead he or she must be able to state: ‘I implemented a good system and reasonable processes to guard against this’" says Dr Barker.
Mike Pryce, AIG, Head of Management Liability at AIG, said: “Board members should not underestimate the changing nature of risks they face. Well-informed directors who have their potential personal liability in mind will be better-placed to navigate the challenges of such an increasingly dense, legal and physical, risk based environment”.