References (91)


Citations (5)



Shareholder Suits and Outside Director Liability: The Case of Korea

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

July 2011

Journal of Korean Law, Vol. 11, pp. 325-362, 2011
Stanford Law and Economics Olin Working Paper No. #
ECGI - Law Working Paper No. 47/2005

Reforms to Korean corporate and securities law carried out in the wake of the 1997-1998 East Asian financial crisis included a mandate that boards include a minimum number of outside directors and facilitation of shareholder lawsuits against board members for damages. The strategy of imposing liability risk on directors (both inside and outside) appeared to follow U.S. practice. In the U.S., outside directors of public companies are often sued but rarely face personal, or “out-of-pocket,” liability unless they engage in self-dealing. Instead, damages and legal fees are paid by the company, directors' and officers' (D&O) insurance, or both. Outside directors of public companies in Australia, Canada, Britain, France, Germany, and Japan similarly rarely face out-of-pocket liability due to shareholder lawsuits. Moreover, when events have occurred in these countries that increase the risk of out-of-pocket liability, there is a strong tendency for political or market forces to reestablish a non-zero but minimal level of risk for actions that do not involve self-dealing. Korea’s experience seems to be similar. We argue that Korea could go somewhat further to encourage litigation against outside directors of public companies, but should not open the way for “out of pocket” liability to become commonplace.

For a shorter, somewhat updated version of this article, see Black, Cheffins & Klausner, Shareholder Suits Against Korean Directors (2012), at http://papers.ssrn.com/abstract=913623.

For the other principal pieces of our overall project on outside director liability, see:

Black, Cheffins & Klausner, Outside Director Liability (Stanford Law Review, 2006), http://papers.ssrn.com/abstract=894921

Cheffins and Black, Outside Director Liability Across Countries, (Texas Law Review 2006), http://papers.ssrn.com/abstract=438321.

Additional pieces of this overall project are:

http://papers.ssrn.com/abstract=878135 (policy analysis)

http://papers.ssrn.com/abstract=382422 (a pre-Enron and WorldCom version of Outside Director Liability)

http://papers.ssrn.com/abstract=628223 (study of Korea)

http://papers.ssrn.com/abstract=682507 (summary article for a finance audience)

http://papers.ssrn.com/abstract=800584 (Germany-centered)

http://papers.ssrn.com/abstract=800604 (German language version of Germany-paper)

http://papers.ssrn.com/abstract=590913 (summary for practitioner audience)

Number of Pages in PDF File: 40

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

JEL Classification: G32, G34

Open PDF in Browser Download This Paper

Date posted: January 17, 2005 ; Last revised: December 7, 2011

Suggested Citation

Cheffins, Brian R. and Black, Bernard S. and Klausner, Michael, Shareholder Suits and Outside Director Liability: The Case of Korea (July 2011). Journal of Korean Law, Vol. 11, pp. 325-362, 2011; Stanford Law and Economics Olin Working Paper No. #; ECGI - Law Working Paper No. 47/2005. Available at SSRN: http://ssrn.com/abstract=628223

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)
B-1050 Brussels
Bernard S. Black (Contact Author)
Northwestern University - School of Law ( email )
375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)
European Corporate Governance Institute (ECGI)
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)
Feedback to SSRN

Paper statistics
Abstract Views: 7,833
Downloads: 944
Download Rank: 15,280
References:  91
Citations:  5

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.313 seconds