As the economy continues to falter due to the ongoing recession, officers and directors of public companies face the increasing possibility that their decisions will be challenged by investors, regulators, and even criminal prosecutors. This increased scrutiny makes it more important than ever that directors understand their obligations and potential liabilities.
As the economy continues to falter due to the ongoing recession, officers and directors of public companies face the increasing possibility that their decisions will be challenged by investors, regulators, and even criminal prosecutors. This increased scrutiny makes it more important than ever that directors understand their obligations and potential liabilities.
Public criticism of executive compensation packages has grown as the recession has continued. On anear-daily basis, headlines highlight stories of bignamecompanies assailed on all sides by resentfulshareholders and their legal representatives. In additionto private litigation, the government is increasingits activity on this front. The recent publicity andthreatened government action concerning the AIGbonuses is just one example of this increased scrutiny.Another aspect is the recent announcement byChairman Mary Schapiro that the Securities andExchange Commission (SEC) is preparing a measurethat will press corporate boards to explain inmore detail how the board oversees risk. With thesenew initiatives come new potential litigation hazardsfor directors.
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