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http://ssrn.com/abstract=728442
 
 

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Unleashing a Gatekeeper: Why the SEC Should Mandate Disclosure of Details Concerning Directors' & Officers' Liability Insurance Policies


Sean J. Griffith


Fordham University School of Law

March 24, 2005

U of Penn, Inst for Law & Econ Research Paper No. 05-15

Abstract:     
This Essay explores the connection between corporate governance and D&O insurance. It argues that D&O insurers act as gatekeepers and guarantors of corporate governance, screening and pricing corporate governance risks to maintain the profitability of their risk pools. As a result, D&O insurance premiums provide the insurer's assessment of a firm's governance quality. Most basically, firms with good corporate governance pay relatively low D&O premiums while firms with worse corporate governance pay more. This simple relationship could signal important information to investors and other capital market participants. Unfortunately, the signal is not being sent. Corporations lack the incentive to produce this disclosure themselves, and U.S. securities regulators do not require registrants to provide this information. This Essay therefore advocates a change to U.S. securities regulation, making disclosure of D&O policy details - specifically premiums, limits and retentions under each type of coverage, as well as the identity of the insurer - mandatory.

Number of Pages in PDF File: 42

Keywords: Corporate governance, insurance, director, officer, liability, gatekeeper, mandate, disclosure, litigation

JEL Classification: K00, K22

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Date posted: May 25, 2005  

Suggested Citation

Griffith, Sean J., Unleashing a Gatekeeper: Why the SEC Should Mandate Disclosure of Details Concerning Directors' & Officers' Liability Insurance Policies (March 24, 2005). U of Penn, Inst for Law & Econ Research Paper No. 05-15. Available at SSRN: http://ssrn.com/abstract=728442 or http://dx.doi.org/10.2139/ssrn.728442

Contact Information

Sean J. Griffith (Contact Author)
Fordham University School of Law ( email )
140 West 62nd Street
New York, NY 10023
United States
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