Abstract

http://ssrn.com/abstract=590913
 
 

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Outside Directors and Lawsuits: What are the Real Risks?


Brian R. Cheffins


University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

Bernard S. Black


Northwestern University - School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

Michael Klausner


Stanford Law School


McKinsey Quarterly, 2004

Abstract:     
We often hear that hardly anyone wants to sit on corporate boards these days, largely because they fear personal liability. Our investigation of seven representative countries (Australia, Britain, Canada, France, Germany, Japan, and the United States) suggests that the liability concern is overdone. Although there are good reasons for outside directors to fulfill their duties diligently, fear of liability should not be one of them. Outside directors face only a tiny risk of paying damages or legal fees out of their own pockets.

This article is a revised and condensed version of Bernard Black, Brian Cheffins, and Michael Klausner, Liability Risk for Outside Directors: A Cross-Border Analysis, European Financial Management vol. 10 (forthcoming 2004), available at http://ssrn.com/abstract=557070, which in turn is a summary of two longer papers, Bernard S. Black, Brian R. Cheffins, and Michael Klausner, Outside Director Liability (working paper 2004), available at http://ssrn.com/abstract=382422, and Bernard S. Black and Brian R. Cheffins, Outside Director Liability Across Countries (working paper 2003), available at http://ssrn.com/abstract=438321.

Number of Pages in PDF File: 11

Keywords: corporate governance, director liability, fiduciary duty, securities law, securities class actions, law and finance, director duties

JEL Classification: G32, G34

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Date posted: September 15, 2004  

Suggested Citation

Cheffins, Brian R. and Black, Bernard S. and Klausner, Michael, Outside Directors and Lawsuits: What are the Real Risks?. McKinsey Quarterly, 2004. Available at SSRN: http://ssrn.com/abstract=590913

Contact Information

Brian R. Cheffins
University of Cambridge - Faculty of Law ( email )
10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Bernard S. Black (Contact Author)
Northwestern University - School of Law ( email )
375 E. Chicago Ave
Unit 1505
Chicago, IL 60611
United States
512-503-2784 (Phone)

Northwestern University - Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)
European Corporate Governance Institute (ECGI)
Brussels
Belgium
Michael D. Klausner
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-6433 (Phone)
650-725-0253 (Fax)
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