Abstract

http://ssrn.com/abstract=878135
 
 

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Outside Director Liability: A Policy Analysis


Bernard S. Black


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

Brian R. Cheffins


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

Michael Klausner


Stanford Law School


Journal of Institutional and Theoretical Economics, Vol. 162, 2006
ECGI - Law Working Paper No. 59/2006
Stanford Law and Economics Olin Working Paper No. 319
U of Texas Law, Law and Econ Research Paper No. 54

Abstract:     
Outside directors of public companies play a central role in overseeing management. Nonetheless, they have rarely incurred personal, out-of-pocket liability for failing to carry out their assigned tasks, either in the litigation-prone United States or other countries. Historically, as threats to this near-zero personal liability regime have appeared, market and political forces have responded to restore the status quo. We suggest here reasons to believe that this arrangement is justifiable from a policy perspective, at least in countries where reputation and other extra-legal mechanisms provide reasonable incentives for outside directors to be vigilant.

Number of Pages in PDF File: 22

Keywords: outside directors, liability, corporate governance

JEL Classification: G34, G38, K22

Accepted Paper Series


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Date posted: January 25, 2006  

Suggested Citation

Black, Bernard S. and Cheffins, Brian R. and Klausner, Michael, Outside Director Liability: A Policy Analysis. Journal of Institutional and Theoretical Economics, Vol. 162, 2006; ECGI - Law Working Paper No. 59/2006; Stanford Law and Economics Olin Working Paper No. 319; U of Texas Law, Law and Econ Research Paper No. 54. Available at SSRN: http://ssrn.com/abstract=878135

Contact Information

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
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
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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