Outside Directors, Liability Risk and Corporate Governance: A Comparative Analysis (English Version)
Brian R. Cheffins
University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)
Bernard S. Black
Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)
Stanford Law School
ECGI - Law Working Paper No. 48
U of Texas law, Law and Econ Research Paper No. 31
Outside directors constitute a key component of most prescriptions for good governance of public companies. Given that outside directors are important corporate governance players, one is led to wonder what will motivate the individuals serving in this capacity to carry out their responsibilities in an effective manner. An obvious possibility is that concerns about being held personally liable will push them to perform effectively. This chapter correspondingly considers the scope of outside director liability in seven countries (Australia, Britain, Canada, France, Germany, Japan and the United States). The chapter indicates that outside directors of public companies are at some risk when litigants are seeking to send a message to those serving in the boardroom of public companies. Generally, however, such individuals only very rarely pay damages or legal expenses out-of-their own pocket. The chapter offers a brief assessment of the costs and benefits of current arrangements and concludes that, consistent with the current cross-border pattern, out-of-pocket liability should remain a rare outcome.
Note: A German version of this paper can be found at: http://ssrn.com/abstract=800604
Number of Pages in PDF File: 38
Keywords: outside directors, corporate governance, Germany, supervisory board, director liability, securities law, corporate law
JEL Classification: G30, G34
Date posted: September 9, 2005
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