|
 |
|
Unleashing a Gatekeeper: Why the SEC Should Mandate Disclosure of Details Concerning Directors' and Officers' Liability Insurance Policies
Sean J. Griffith, University of Pennsylvania Law School (visiting 2004-2005), Associate Professor University of Connecticut School of Law
ABSTRACT:
This Essay explores the connection between corporate
governance and D&O insurance. It argues that D&O
insurers act as gatekeepers and guarantors of corporate
governance, screening and pricing corporate governance
risks to maintain the profitability of their risk pools. As a
result, D&O insurance premiums provide the insurer’s
assessment of a firm’s governance quality. Most basically,
firms with relatively worse corporate governance pay higher
D&O premiums. This simple relationship could signal
important information to investors and other capital market
participants. Unfortunately, the signal is not being sent.
Corporations lack the incentive to produce this disclosure
themselves, and U.S. securities regulators do not require
registrants to provide this information. This Essay therefore
advocates a change to U.S. securities regulation, making
disclosure of D&O policy details—specifically premiums,
limits and retentions under each type of insurance, as well as
the identity of the insurer—mandatory.
SUGGESTED CITATION:
Sean J. Griffith,
"Unleashing a Gatekeeper: Why the SEC Should Mandate Disclosure of Details Concerning Directors' and Officers' Liability Insurance Policies"
(March 24, 2005).
University of Pennsylvania Law School.
Scholarship at Penn Law.
Paper 65.
http://lsr.nellco.org/upenn/wps/papers/65
|
|
