Sitting Ducks and Decoy Ducks: New Trends in the Indemnification of Corporate Directors and Officers

Abstract

A vast pother has arisen in corporate circles over the dreadful plight of officers and directors, beset on the one hand by predatory strike suitors anxious to convert them and their little families into welfare clients if their efforts to maximize the corporation's profits come to grief, beset on the other by ruthless minions of the Antitrust Division determined to throw them into the federal pen if those efforts succeed.Some, perhaps most, of the excitement has been generated by the aggressive and imaginative propaganda of underwriters pushing insurance against such hazards. The general tenor of the insurance companies' campaign is illustrated by its advertisements in the business press-for example, an ad which features a composite photograph of a board of directos presided over by a stuffed duck and the explanatory text, "As a corporate director or officer, you may be a sitting duck for a shareholder or third party liability suit." The pother is not, however, entirely synthetic; there have in recent years been a large number of highly publicized suits (or threats of suits) against directors. Most of them rested on allegations that the directors were feathering their personal nests at the corporation's expense, but a few appeared to charge nothing worse than negligence, bad judgment, or even misplaced altruism on the part of the defendant directors.