Board Membership Requires Heightened VigilanceAugust 20, 2014
Stephanie Resnick recently participated in a Q&A session with Patricia O'Connell of Advisen Risk Network. Full text can be found in the August 20, 2014, issue, but a synopsis is below.
What do you see as the greatest risks boards face today?
Stephanie Resnick: Directors today face increased scrutiny and potential liability for their service on corporate boards. Shareholders frequently file derivative and other actions against directors. Third parties regularly file class actions and include members of the board as defendants. Boards must be prepared to deal with the heightened risk in this time of rising claims. Directors must be vigilant to keep informed about the issues and transactions before them, and have familiarity with legal requirements and protocols.
Cyber security and data breaches are now among the “hot” areas of D&O litigation. For instance, in recent federal cases, corporate boards have been sued under breach of fiduciary duty theories for failure to take adequate steps to protect information related to data breaches. The adverse consequences can be huge, as the recent Target case demonstrates. Directors have been “targeted” as potential pockets of revenue. This is true in the securities arena as well as in mergers and acquisitions.