One in five companies have experienced an investigation involving a company director
By Francis Kean, Executive Director, Willis
Published: 31 March 2015
The annual Willis/Allen&Overy D&O Survey, “Blurring the Lines”, is our third annual survey and, with over 180 responses, our largest and most authoritative to date. We surveyed executive and non-executive directors, in-house lawyers, risk officers and compliance officers. Its key findings -
- More than one in five respondents to our survey has experience of a claim or investigation involving a director of their company;
- Only one in three are aware of the significant expansion of the directors’ disqualification regime;
- More than 85% did not know of proposals to permit the sale of claims against directors to third parties;
- Regulatory and other investigations and inquiries are again considered to be the greatest risks facing businesses and their directors, followed by criminal and regulatory fines and penalties;
- When it comes to D&O policy coverage, the top concerns are that there should be clear and easy-to-follow policy terms; that the ability of insurers to refuse a claim based on non-disclosure should be restricted; and that cover should be available for the early stages of an investigation, prior to the main hearing; and
- There is a wealth of interesting detail in the section of the report dealing with the liability landscape and a surprising absence of knowledge or concern among directors about proposals here in the UK to strengthen and facilitate remedies available against them. These include the prospect of the sale or assignment of claims against directors to third parties and the proposal to introduce compensation orders against directors who have been disqualified.
It is, however, the findings on the coverage front which really caught my eye, especially when we began to drill down into the detail of some of the responses.
For example, whilst the number-one overall priority for respondents is: “clear and easy to follow policy terms and conditions”, it is surprising that the directors themselves, as the end users of the policy (and especially the non-executive directors), rank this rather lower than do the risk or compliance functions or in-house lawyers. It seems to me this is more likely to suggest a lack of experience by directors of the opaque and difficult-to-follow policy terms and conditions that can crop up than a sense of comfort that all is well.
I also find it interesting that risk managers are much more aware than directors are of the need to focus on control of the claims process. Again this may suggest that directors have not had much direct experience of the issues which can arise.
There is also the intriguing question as to whether, when risk managers talk about control of the claims process, they have in mind the same type of control which the directors in their personal capacities would wish the company to exercise on their behalf. In other words the interests of the company may not always be the same as those of the directors themselves. This is a theme to which I consistently return.