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Directors' and Officers' Liability (2nd Edition)
 by Larry D. Soderquist, James A. Fanto, Pat K Chew
 
 Copyright: 2005-2012
 Last Updated: October 2012

 Product Details >> 

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  • ISBN Number: 1402406568
  • Page Count: 424
  • Number of Volumes: 1
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Executives in corporations and financial firms are on the hot seat as never before in the wake of scandals that have infuriated investors and the public at large.

PLI’s Directors’ and Officers’ Liability has never been more necessary, providing executives and their legal counsel with the guidance needed to minimize the legal exposure of corporate heads and help them meet the professional performance expectations of demanding shareholders.

Directors’ and Officers’ Liability shows you how top managers can satisfy duties of care, loyalty, good faith, and disclosure (and avoid charges of negligence and conflict of interest, among others); meet certification, due diligence and director independence requirements; follow best professional practices advocated by leading U.S. business groups; successfully use various legal defenses when they are charged with violations; take advantage of "safe harbor" statutes that lessen their legal exposure; and protect themselves through contractual indemnification and D&O insurance.

Updated at least once a year, Directors’ and Officers’ Liability is a vital reference for executives, managers, and legal counsel in corporations, financial firms, and business associations, as well as federal and state regulators.

  Abbreviations
Chapter 1: Introduction
  • § 1:1 : Overview1-1
  • § 1:2 : Background and Trends1-4
    • § 1:2.1 : History1-4
    • § 1:2.2 : The Dominance of Agency Theory1-5
    • § 1:2.3 : Trends and Events1-6
    • § 1:2.4 : The Financial Crisis and the Legislative Response1-10
  • § 1:3 : Sources of Legal Obligations and Liabilities1-11
    • § 1:3.1 : Corporate Law1-12
      • [A] : Applicable Law1-12
      • [B] : Corporate Charter, Bylaws, and Corporate Contracts1-13
      • [C] : Delaware Corporate Law1-14
      • [D] : Model Corporate Codes1-15
    • § 1:3.2 : Securities Laws1-15
      • [A] : Generalities1-15
      • [B] : Listing Requirements1-17
    • § 1:3.3 : Civil Versus Criminal Law1-17
  • § 1:4 : Non-Legal Expectations1-18
    • § 1:4.1 : Recommended Practices and Codes1-18
    • § 1:4.2 : Institutional Investors’ Expectations and Pressures1-19
  • § 1:5 : Defenses and Protections1-21
    • § 1:5.1 : Legal Defenses1-21
    • § 1:5.2 : Contractual1-21
  • § 1:6 : Summary1-21
Chapter 2: Basic Business Obligations and Duties of Directors and Officers
  • § 2:1 : Overview2-2
  • § 2:2 : Basic Duties of Directors2-3
    • § 2:2.1 : What Do Directors Do?2-3
      • [A] : Basic Obligations2-5
        • [A][1] : The Board’s Relationship with the CEO2-8
    • § 2:2.2 : Board Structure2-9
      • [A] : Board Leadership2-9
        • [A][1] : The Lead Director2-11
      • [B] : Board Size2-13
        • [B][1] : Classified Boards2-14
      • [C] : Board Meetings2-15
        • [C][1] : Shareholder Inspection of Board Minutes2-17
      • [D] : Service on Multiple Boards2-25
      • [E] : Board Election2-27
      • [F] : Removal or Resignation of a Director2-31
    • § 2:2.3 : Duties of Directors2-36
      • [A] : Duty of Care2-36
        • [A][1] : Definition2-36
        • [A][2] : Elements2-37
          • [A][2][a] : Knowledge2-37
          • [A][2][b] : Commitment2-38
          • [A][2][c] : Adequate Information; Reliance on Others2-39
          • [A][2][d] : Duty to Inquire2-40
        • [A][3] : Business Judgment Rule2-43
          • [A][3][a] : General Standard and Application2-43
          • [A][3][b] : Rationale2-44
          • [A][3][c] : Prerequisites2-45
        • [A][4] : Standard of Conduct2-47
        • [A][5] : Legislative Limitations on Directors’ Liability2-48
        • [A][6] : Summary2-51
      • [B] : Duty of Good Faith2-52
      • [C] : Duty to Obey the Law2-58
      • [D] : Duty of Disclosure2-59
      • [E] : Duty of Confidentiality2-60
      • [F] : Liability for Corporate Acts2-62
  • § 2:3 : Basic Duties of Officers2-62
    • § 2:3.1 : Who Are the Officers?2-62
    • § 2:3.2 : What Do Officers Do?2-63
    • § 2:3.3 : Duties of Officers2-66
  • § 2:4 : Summary2-69
Chapter 3: Board Committees
  • § 3:1 : Overview3-3
  • § 3:2 : Delegation to and Reliance on Board Committees3-4
    • § 3:2.1 : Delegation3-4
    • § 3:2.2 : Reliance3-6
  • § 3:3 : Board Committees3-7
    • § 3:3.1 : The Independent Director3-7
      • [A] : Definition and Practice3-7
      • [B] : Legal Requirements3-9
        • [B][1] : Corporate Law3-9
        • [B][2] : Stock Exchange Rules3-9
        • [B][3] : SEC Disclosure3-13
      • [C] : Criticism3-13
    • § 3:3.2 : Audit Committee3-14
      • [A] : Origin and Development3-14
      • [B] : Justification3-15
      • [C] : Membership and Qualifications3-17
        • [C][1] : Independence and Financial Literacy3-17
        • [C][2] : The Financial Expert3-19
        • [C][3] : Size and Structure3-21
      • [D] : Duties3-22
        • [D][1] : General; The Charter3-22
        • [D][2] : Auditing3-27
          • [D][2][a] : External Auditing3-27
          • [D][2][b] : Internal Auditing3-28
        • [D][3] : Complaint Procedures and Investigations3-30
        • [D][4] : Risk Management3-30
        • [D][5] : Compliance3-34
      • [E] : Related Obligations of Officers and Directors3-35
        • [E][1] : Officer Certification3-35
          • [E][1][a] : Content of the Certification3-38
          • [E][1][b] : Form of Certification3-48
          • [E][1][c] : Penalties for Improper Certification3-49
        • [E][2] : Improper Influence on Audits3-51
        • [E][3] : Prohibition on Retaliation Against Whistleblowers3-52
          • [E][3][a] : Dodd-Frank Whistleblower Provisions and SEC Implementing Rules3-58
    • § 3:3.3 : Nominating/Corporate Governance Committee3-70
      • [A] : Justification and Background3-70
      • [B] : Composition and Charter3-71
      • [C] : Duties3-72
        • [C][1] : Nominating Responsibilities3-72
          • [C][1][a] : Board Membership Policies3-72
          • [C][1][b] : Recruiting and Nominating Directors3-73
          • [C][1][c] : Assigning Directors to Committees3-89
          • [C][1][d] : Planning for Management Succession3-90
        • [C][2] : Corporate Governance Responsibilities3-91
          • [C][2][a] : Corporate Governance Guidelines3-91
          • [C][2][b] : Management and Board Evaluation3-92
          • [C][2][c] : Director Compensation3-93
          • [C][2][d] : Review and Revision of Board Policies3-94
          • [C][2][e] : Director Orientation and Education3-95
          • [C][2][f] : Shareholder Communication3-95
    • § 3:3.4 : Compensation Committee3-105
      • [A] : Justification and Background3-105
      • [B] : Composition and Charter3-107
        • [B][1] : Relationship with Compensation Consultants3-113
        • [B][2] : Risk-Based Compensation3-115
      • [C] : Duties3-120
        • [C][1] : Determining CEO Compensation3-120
          • [C][1][a] : Option Backdating and Other Manipulation3-122
        • [C][2] : Other Compensation Policies3-137
        • [C][3] : Shareholder Disclosure3-137
        • [C][4] : Special Compensation Arrangements3-138
      • [D] : Related Executive Compensation Issues3-139
        • [D][1] : Clawbacks3-139
        • [D][2] : Freeze on Extraordinary Payments3-142
    • § 3:3.5 : Legal Compliance/Ethics Committee3-144
      • [A] : Justification and Background3-144
      • [B] : Generalities3-145
      • [C] : Duties3-146
        • [C][1] : Legal Compliance3-146
          • [C][1][a] : Supervision of Compliance3-146
          • [C][1][b] : Attorney Reporting/Qualified Legal Compliance Committee3-147
          • [C][1][c] : Internal Investigations3-149
        • [C][2] : Ethics3-150
      • [D] : Related Restrictions on Executives3-154
    • § 3:3.6 : Disclosure Committee3-154
      • [A] : Background3-154
      • [B] : Disclosure Controls3-155
      • [C] : Disclosure Committee3-156
      • [D] : Special Disclosure Issues3-157
        • [D][1] : Off-Balance Sheet Disclosure in Management’s Discussion and Analysis3-157
        • [D][2] : Reconciliation of Non-GAAP or Pro Forma Financial Measures3-160
        • [D][3] : Real-Time Disclosures3-162
        • [D][4] : Mandatory SEC Review of Disclosure3-163
  • § 3:4 : Summary3-164
Chapter 4: Duty of Loyalty of Directors and Officers
  • § 4:1 : Overview4-2
  • § 4:2 : Duty of Loyalty4-3
    • § 4:2.1 : Definition4-3
    • § 4:2.2 : When the Duty Arises4-3
    • § 4:2.3 : Rationale4-4
    • § 4:2.4 : Legal Sources4-5
    • § 4:2.5 : Relationship with the Duty of Care4-5
  • § 4:3 : Conflicts of Interest4-6
    • § 4:3.1 : Definitions and Generalities4-6
    • § 4:3.2 : Safe Harbor Statutes4-8
      • [A] : Scope4-8
      • [B] : Statutory Procedures4-9
      • [C] : Statutory Effect4-12
    • § 4:3.3 : The Special Case of Officer and Director Loans4-13
    • § 4:3.4 : Remedies4-15
    • § 4:3.5 : SEC Conflict Disclosure4-15
    • § 4:3.6 : Executive Compensation4-17
      • [A] : Corporate Law4-17
      • [B] : Federal Securities Law4-24
        • [B][1] : “Say on Pay”4-33
        • [B][2] : Effect of the Financial Crisis upon Executive Compensation4-39
  • § 4:4 : Competition with the Corporation4-42
    • § 4:4.1 : Use of Corporate Property, Information and Position4-42
      • [A] : Transactions with Investment Bankers4-45
    • § 4:4.2 : Corporate Opportunity4-47
      • [A] : Definition4-47
      • [B] : Rationale4-48
      • [C] : Standards4-48
      • [D] : Officer and Director Liabilities4-50
      • [E] : Corporation’s Rules4-51
    • § 4:4.3 : Competition4-51
  • § 4:5 : Common Officers and Directors4-52
  • § 4:6 : Officers and Directors of a Controlling Shareholder4-53
    • § 4:6.1 : Generalities4-53
      • [A] : Tender Offer Freezeouts4-60
    • § 4:6.2 : Securities Laws and Stock Exchange Rules4-64
  • § 4:7 : Summary4-65
Chapter 5: Special Obligations of Directors and Officers
  • § 5:1 : Overview5-2
  • § 5:2 : Sale of Control5-2
  • § 5:3 : Approving and Recommending a Merger or Acquisition5-4
    • § 5:3.1 : Corporate Law Requirements5-4
    • § 5:3.2 : Federal Securities Law Requirements5-7
    • § 5:3.3 : Fairness Opinions5-8
  • § 5:4 : Decision-Making in a Contested Merger or Acquisition5-11
    • § 5:4.1 : Background5-11
    • § 5:4.2 : Corporate Law Jurisprudence5-12
      • [A] : Standard Governing Defensive Measures5-12
        • [A][1] : Pre-Existing Defenses5-14
      • [B] : Defensive Efforts to Thwart Proxy Contests5-22
      • [C] : From Defenders to Auctioneers5-25
    • § 5:4.3 : State Anti-Takeover Statutes5-34
    • § 5:4.4 : Director Duties Under Federal Law5-35
    • § 5:4.5 : Restrictions on Officers5-36
      • [A] : Management Buyouts5-38
  • § 5:5 : Returning Profits to Shareholders: Dividends and Repurchases5-47
    • § 5:5.1 : Dividend Decision5-47
    • § 5:5.2 : Repurchase Decision5-48
    • § 5:5.3 : Statutory Restrictions5-49
    • § 5:5.4 : Defensive Uses5-50
    • § 5:5.5 : Director Liability for Improper Dividends and Repurchases5-51
  • § 5:6 : Director Decisions Near Insolvency5-52
  • § 5:7 : Director Decisions on Shareholder Derivative Lawsuits5-54
    • § 5:7.1 : Shareholder Derivative Lawsuits5-54
    • § 5:7.2 : Shareholder Demand Requirement5-60
    • § 5:7.3 : Demand Futility5-62
    • § 5:7.4 : Special Litigation Committee5-69
    • § 5:7.5 : Personal Jurisdiction Over Nonresident Directors and Officers5-74
  • § 5:8 : Summary5-75
Chapter 6: Special Obligations of Directors and Officers Under the Federal Securities Laws
  • § 6:1 : Overview6-2
  • § 6:2 : Disclosure Obligations6-3
    • § 6:2.1 : Securities Offerings6-3
      • [A] : Public Offerings6-3
        • [A][1] : Generalities6-3
          • [A][1][a] : Pricing of Offerings6-4
        • [A][2] : Management Disclosure6-5
        • [A][3] : Section 11 Antifraud Liability6-7
          • [A][3][a] : Damages6-8
          • [A][3][b] : Whistleblowing Defense6-9
          • [A][3][c] : Due Diligence Defense6-9
            • [A][3][c][i] : Generalities6-9
            • [A][3][c][ii] : Non-Expertised Parts of Registration Statement6-10
            • [A][3][c][iii] : Reliance upon Experts6-12
          • [A][3][d] : Effect of Earnings Statement6-13
      • [B] : Private Offerings6-14
        • [B][1] : Generalities6-14
        • [B][2] : Antifraud Liability Under Section 10(b)6-15
      • [C] : SEC Actions6-17
    • § 6:2.2 : Communications with Shareholders Outside Offerings6-18
      • [A] : Periodic Filings Under the Exchange Act6-18
        • [A][1] : Generalities6-18
        • [A][2] : Liabilities6-22
      • [B] : Public Statements6-23
      • [C] : Regulation Fair Disclosure6-25
      • [D] : Forward-Looking Statements6-27
  • § 6:3 : Obligations Related to Trading in Company Securities6-28
    • § 6:3.1 : Insider Trading6-28
      • [A] : Background6-28
      • [B] : Use of Inside Information6-30
      • [C] : Indirect Insider Trading6-32
        • [C][1] : Expert Networks6-40
      • [D] : Insider Trading with Respect to Tender Offers6-41
      • [E] : Penalties and Damages6-45
        • [E][1] : Proper Forum6-46
    • § 6:3.2 : Insider Reporting and Short-Swing Trading6-47
      • [A] : Insider Reporting6-47
      • [B] : Short-Swing Trading6-49
      • [C] : Prohibition on Short Sales6-52
    • § 6:3.3 : Trading During Pension Blackout6-52
    • § 6:3.4 : Resales of Privately Placed Securities6-54
  • § 6:4 : Controlling Person Liability6-56
    • § 6:4.1 : Basics and the Issue of Control6-56
    • § 6:4.2 : Defenses6-57
  • § 6:5 : Aiding-and-Abetting Liability6-58
  • § 6:6 : Obligations Under ERISA6-60
    • § 6:6.1 : Applicable Plans6-60
    • § 6:6.2 : Plan Fiduciaries6-61
    • § 6:6.3 : Bases for Liability6-64
  • § 6:7 : Summary6-67
Chapter 7: Criminal Liability and Other Significant Penalties
  • § 7:1 : Overview7-2
  • § 7:2 : Basics of Criminal Liability7-4
    • § 7:2.1 : Prosecutors7-4
    • § 7:2.2 : Burden of Proof7-7
    • § 7:2.3 : Wrongful Intent7-7
    • § 7:2.4 : Theories of Liability7-8
      • [A] : Committing the Crime7-8
      • [B] : The Responsible Corporate Officer7-8
    • § 7:2.5 : Penalties7-9
  • § 7:3 : Key Criminal Statutes7-10
    • § 7:3.1 : Federal Criminal Laws7-10
      • [A] : Crimes Under Securities Act or Exchange Act7-13
      • [B] : Securities Fraud7-15
      • [C] : Obstruction of Justice7-16
      • [D] : Improper Certification7-17
      • [E] : Retaliation Against Whistleblower7-18
      • [F] : Conspiracy7-19
      • [G] : Insider Trading7-19
      • [H] : Mail and Wire Fraud7-20
      • [I] : Foreign Corrupt Practices Act7-23
        • [I][1] : Anti-Bribery Provisions7-24
          • [I][1][a] : Intent7-26
          • [I][1][b] : Exceptions/DOJ Advice7-27
          • [I][1][c] : Penalties7-28
        • [I][2] : Internal Controls7-28
    • § 7:3.2 : State Criminal Laws7-30
  • § 7:4 : Sentencing7-33
    • § 7:4.1 : Basics7-33
    • § 7:4.2 : Sentencing Guidelines7-35
      • [A] : Sarbanes-Oxley Enhancements7-38
      • [B] : Sentence Reflecting Losses Caused7-39
      • [C] : Sentence Reflecting Cooperation with Prosecutors7-41
  • § 7:5 : SEC Administrative Enforcement Powers7-42
    • § 7:5.1 : Generalities7-42
    • § 7:5.2 : Cease-and-Desist Powers, Disgorgement, Penalties7-43
    • § 7:5.3 : Officer and Director Bar7-44
    • § 7:5.4 : Corporate Monitor7-46
  • § 7:6 : Criminal Liability of Public Corporations7-49
  • § 7:7 : Summary7-66
Chapter 8: Director and Officer Indemnification and Insurance
  • § 8:1 : Overview8-2
  • § 8:2 : Liability Costs8-3
  • § 8:3 : Indemnification8-5
    • § 8:3.1 : Indemnification Statutes8-5
      • [A] : Coverage8-6
      • [B] : Proceedings8-7
      • [C] : Covered Liabilities8-7
      • [D] : Permissible Indemnification8-8
        • [D][1] : Third-Party Actions8-8
        • [D][2] : Corporate Actions8-10
        • [D][3] : Exclusions8-11
        • [D][4] : Corporate Determination8-11
        • [D][5] : Shareholder Disclosure8-12
      • [E] : Mandatory Indemnification8-12
      • [F] : Advances to Directors and Officers8-15
      • [G] : Court-Ordered Indemnification8-21
    • § 8:3.2 : Contractual Indemnification8-22
      • [A] : Exclusivity of Statutory Indemnification8-23
      • [B] : Non-Exclusivity8-23
      • [C] : Safeguarding Indemnification Funds8-24
  • § 8:4 : D&O Insurance8-25
    • § 8:4.1 : Background8-25
    • § 8:4.2 : Market for D&O Insurance8-26
    • § 8:4.3 : Insurance Statutes8-27
    • § 8:4.4 : Insurance Policies8-27
      • [A] : Claims8-28
      • [B] : Losses8-30
      • [C] : Exclusions8-31
      • [D] : Notice8-32
      • [E] : Defense of Litigation8-33
        • [E][1] : Defense Counsel8-34
        • [E][2] : Expense Advances8-34
        • [E][3] : Allocation Issues8-35
        • [E][4] : Settlements8-36
      • [F] : Outside Directors8-37
      • [G] : Change of Control8-37
      • [H] : Cancellation8-38
      • [I] : Effect of the Bankruptcy of the Company8-39
      • [J] : Disclosure of D&O Insurance8-40
  • § 8:5 : Summary8-41
Chapter 9: Table of Authorities
Chapter 10: Index to Directors' and Officers' Liability

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