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Outside Directors And Lawsuits: What Are The Real Risks?
Some public companies are having difficulty attracting outside directors because good candidates now worry about their liability in lawsuits brought by shareholders. Our research suggests that such concerns are overblown. Suits that name outside directors rarely come to trial, and settlements are nearly always covered by the corporation or its insurer.
The take-away: Although outside directors have good reasons to serve diligently, fear of liability shouldn't be one of them. In reality, these directors face little risk of paying damages or legal fees out of their own pockets.
Articles provided by The McKinsey Quarterly
© 1992-2003 McKinsey & Company, Inc
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