The underlying culture of a firm can be the trigger for a variety of claims which could find their way to the boardroom. For example, if a firm was held to have a toxic culture where either sexual harassment or racism were endemic then it is understandable that a spotlight will fall on the senior management. There are other pitfalls too, here are a few:
Cyber – a major breach can be a very high-profile event. It could attract the interest of regulators, shareholders, and even a class action by customers.
Brand and reputation – that cyber incident or evidence of a culture where sexual harassment runs deep could also generate claims which could draw in the directors. So too could climate change, or even loose talk on social media.
Class actions - a hit to the share price could lead to fingers being pointed and in short order litigation by disgruntled shareholders. The share price drop itself could be the result of any of the examples above. Whatever the cause, reports show that class actions doubled between 2017 and 2019 in the US and are at their highest level ever.
International programmes – for global businesses, a fit-for-purpose Directors’ and Officers’ policy should be a must-have. The complexity of legislation means that it is essential that risks are understood, and a robust policy is in place that satisfies local regulations, which could mean the need for numerous local policies worldwide.
In the modern business world when the buck does stop with a director, they need to be prepared and, more importantly, know that there is a specialist team ready to step in and guide them through to the other side. The path can be tricky, but with the right support it need not be treacherous.