In case you thought smaller private firms are immune from litigation, here are actual claim examples.
- A director of medical supply company was sued, along with his company, for allegedly misappropriating trade secrets. $200,000 was spent on defense costs and the case was settled for $400,000.
- The estate of a recently passed director (president) sued the other directors for recent company poor performance. Claim settled for $750,000.
- A company recruited a top sales person from a competitor who had an employment contract. The competitor sued for damages after losing its top producer. Defense costs were $250,000 and case was settled for $560,000.
What You Should Do
- Consider Directors and Officer Liability Insurance
- Determine if there are any conflicts of interests among the directors. Directors and officers should avoid situations where their personal interest may, or appears to, conflict with the best interest of the company
- Directors need to be educated in the following:
- Antitrust, political contributions, harassment, and confidentiality
- There should be regular scheduled board meeting, including proper notice. Meeting minutes should be retained forever
- Utilize a qualified attorney, insurance agent, and accountant to help you manage your risk.
- Consider Employment Practices Liability Insurance. Employment-related claims represent a high-visibility, fast-growing area of D&O liability
- Establish internal controls for accounting and financial reporting