The Environment For Directors’ And Officers’ Liability: Evidence From 2009 To Present

Directors’ and officers’ (D&O) liability is a legal topic that is increasingly publicized and talked about. People can sue upper management of a company to hold them liable for not fulfilling their fiduciary duty to shareholders. As a result of an increasing number of these suits being filed, companies are purchasing D&O insurance to protect the individual when sued as a director or officer. As more D&O liability lawsuits arose after the financial crisis of 2009, there was a connection between D&O insurance premiums and executive compensation, which has also been increasing in recent years. Corporations may be relying too heavily on D&O insurance to mitigate risk that should not exist initially. The insurance market for D&O may be transitioning from “soft” to “hard” in the near future because of these changes.