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Emerging Risks for Owners to Consider as their Company's Roles become Redefined

Regardless of your political viewpoint, it is incredibly important for every owner, officer and director to be aware of the changing landscape of 'Corporate Responsibility' as defined by government, quasi-government, think tanks, and perceived industry professionals. There is a clear and obvious 'cultural push' in the US by certain interest groups to set additional standards that would require a company's obligation to go beyond that of their shareholders. In other words, a company and their leadership teams should be aware of and begin planning for formalizing policies and procedures based around certain subject matter, including but not limited to the environment, diversity, equal pay, community and public interests.


In short, as these emerging trends continue to develop they will undoubtedly place additional burden on companies to meet certain standards and avoid lawsuits. If and when lawsuits due arise, it is critical for companies to have a rock solid Directors & Officers Liability policy in place with the necessary coverage terms and limits to properly protect ownership, officers, and directors financial well-being. In a perfect world, this insurance due diligence should occur prior to any lawsuit or allegation.



Additional Information:

By: Sean Jordan, Senior Research Analyst

Editor, D&O Compass

International Risk Management Institute, Inc.


In August of this year, Business Roundtable, the influential nonprofit organization made up of members that are executives of major companies, released a new "Statement on the Purpose of a Corporation." The statement received an especially high level of attention because it represents nearly 200 high-level decision-makers' collective acknowledgment of what has been for some time now a major ongoing paradigm shift in global business operations.


This shift is away from a narrow focus on short-term shareholder profits and toward a more all-encompassing view of different "stakeholder" interests that are not necessarily financial in nature. In the statement, "customers" and "shareholders" were still acknowledged, but so too were employees, suppliers, and the communities in which work is done. Environmental concerns and sustainable practices were also highlighted (as components of the "community" stakeholder).


While the statement details honorable intentions, it is nevertheless still only an aspirational "bar" until individual companies can show tangible steps to actually reach that bar. In the meantime, plaintiffs' lawyers will be paying close attention to see whether companies' leadership teams are adequately living up to these higher standards.


New York Times on this topic:

https://www.nytimes.com/2019/08/19/business/business-roundtable-ceos-corporations.html

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