Ensuring Corporate MisconductHow Liability Insurance Undermines Shareholder Litigation

Ensuring Corporate MisconductHow Liability Insurance Undermines Shareholder Litigation

Tom Baker and Sean J. Griffith

Print publication date: 2013

ISBN: 9780226035154

Publisher: University of Chicago Press

Abstract

Shareholder litigation and class action suits play a key role in protecting investors and regulating big businesses. But Directors' and Officers' liability insurance shields corporations and their managers from the financial consequences of many illegal acts, as evidenced by the recent Enron scandal and many of last year's corporate financial meltdowns. This book demonstrates how corporations use insurance to avoid responsibility for corporate misconduct, dangerously undermining the impact of securities laws, arguing that this need not be the case. Opening up the formerly closed world of corporate insurance, people from every part of the industry were interviewed in order to show the different instances where insurance companies could step in and play a constructive role in strengthening corporate governance—yet currently do not.