Outside Director Liability: A Policy Analysis
Brian R. Cheffins and
Journal of Institutional and Theoretical Economics (JITE), 2006, vol. 162, issue 1, 5-20
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.
JEL-codes: G34 G38 K22 (search for similar items in EconPapers)
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