Directors' liability (IVOR nr. 101) 2017/2.4.2.3:2.4.2.3 Individual experience

Directors' liability (IVOR nr. 101) 2017/2.4.2.3

2.4.2.3 Individual experience

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

‘The whole thing ended with “acquittal” by the Supreme Court. That’s major! If you experienced something like that, you become more alert. I try not to be guided by the consequences of the risks. I believe that I understand what I’m doing, how certain processes run by making the effort that they’re running in the right direction. I always make sure that I’m well insured. I also want to see the insurance policy and check it myself.’1

Adoption of defensive behaviour may depend on individual experience with directors’ liability, which might either amplify or reduce risk perception and trigger a defensive response.2 The directors in this study who were previously exposed to directors’ liability were clearly more concerned about their personal liability exposure than their peers were. Unlike some of the company directors who had no previous liability experience, none of the directors with this experience were prepared to serve on boards without D&O insurance cover and indemnification. Previous research has, in contrast, suggested that individual exposure to risk may increase habituation and minimise risk awareness.3

In this research I found that repeated risk experience could result in reduced risk attentiveness only under specific conditions. These include circumstances when litigation is dropped (e.g. when claims are ill-founded) or when the impact is low and the outcome neutral (e.g. when financial and personal consequences are marginal).4 The interviews notably revealed how directors may recover from repeated risk exposure if a claim is dismissed, even though the exposure may have large financial and personal consequences. Dismissal of a personal liability claim was associated by the participants with the recognition of one’s personal and professional integrity, and was seen as an important step in the rehabilitation process in which reputation is restored and psychological trauma overcome.5

This may explain why company directors attach such great importance to legal defence and compensation for legal expenses. The interviews showed that the company directors who were repeatedly exposed to directors’ liability claims and able to defend themselves successfully, were clearly less concerned about the impact of litigation on their career and their reputation than those who had settled a case or whose cases were pending. Furthermore, these successful defendants displayed considerable knowledge of directors’ liability legislation and less concern for future directors’ liability exposure. They expressed confidence that directors’ liability risks could be controlled, managed, and overcome.

Deze functie is alleen te gebruiken als je bent ingelogd.