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Insurance and Indemnification
3/5/2024 pdw
It should be clear by now that directors have a lot of protection from personal liability. Exculpation clauses limit the claims that can be brought. The business judgment rule presumes those claims lack merit. And § 141(e) forgives a multitude of mistakes if they relied on an expert.
But you're probably wondering, is this protection enough?
No. No it is not. There is more.
Delaware allows corporations to indemnify their officers, directors, employees and agents. Most public corporations mandate indemnification in their bylaws.
In addition, most corporations have directors and officers insurance (often called D&O insurance). So even if directors or officers are found liable, they are unlikely to pay anything from their own pocket.
If that's the case, what purpose do fiduciary duties serve? Are they a deterrent? Punitive? Reputational?
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