38 Pages Posted: 9 Sep 2005
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.
Notes: A German version of this paper can be found at: http://ssrn.com/abstract=800604
Keywords: outside directors, corporate governance, Germany, supervisory board, director liability, securities law, corporate law
JEL Classification: G30, G34
Suggested Citation: Suggested Citation
Cheffins, Brian R. and Black, Bernard S. and Klausner, Michael, Outside Directors, Liability Risk and Corporate Governance: A Comparative Analysis (English Version). ; U of Texas law, Law and Econ Research Paper No. 31. Available at SSRN: https://ssrn.com/abstract=800584
Report to Russian Center for Capital Market Development: Comparative Analysis on Legal Regulation of the Liability of Members of the Board of Directors and Executive Organs of Companies (English Language Version)