Director Liability: Protecting Your Reputation
Doug Greene and Claire Loebs Davis co-authored an article for the January/February edition of the National Association of Corporate Directors’ Directorship magazine titled “Liability: Protecting Your Reputation.” In the article, Greene and Davis discussed the increased risks of securities litigation claims companies and their directors are facing, and how directors can manage the personal risk associated with such claims.
For most directors, securities litigation is a mysterious world ruled by sinister plaintiffs’ lawyers, powerful judges, and a unique legal framework that must be navigated by fancy defense lawyers who charge exorbitant fees. Directors react to this litigation with everything from unnecessary panic to an unjustified feeling of invincibility. The right approach is somewhere in the middle: “attentive concern.” Securities litigation can pose personal risk to directors as well as to their companies, but if directors educate themselves and pay attention, this risk is almost always manageable. …
… Most important, directors must ensure their company selects the right counsel. Securities litigation is a specialty field, and it can be nearly impossible to differentiate between the claims of expertise and experience made by the herd of lawyers that descends upon a company after a suit is filed. And it is a serious error — especially for mid-size and smaller companies — to use a law firm brand name as a proxy for quality and fit. Fortunately, many pitfalls of counsel selection can be avoided if directors keep in mind a few key principles:
- Select a securities litigation specialist.
- Educate yourself about the strategic differences between firms.
- Avoid defaulting to your regular corporate firm.
- Conduct an interview process.