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D&O: Entering Uncharted Territory

Directors’ Liability


Welcome to this the fifth edition in our series of surveys on directors’ liabilities, brought to you by the international law firm Allen & Overy LLP and the global advisory broking and solutions company Willis Towers Watson.

We began this exercise back in 2011 when – fresh from the throes of the global financial crisis – directors and high-ranking executives in public and privately-held corporations were feeling particularly exposed to liability and subject to an unprecedented degree of scrutiny. That said, the incidence of actual criminal, civil or even regulatory proceedings against individuals was still vanishingly small. To plug that perceived accountability gap, the last six years have seen a steady increase in laws and regulations aimed at senior executives.

Over the following pages, we have revisited several of the themes that have consistently presented themselves in previous years, as well as highlighting several new developments that add to the breadth of concerns keeping directors and officers awake at night. We have looked not only at the risks and exposures facing business leaders, but also how well they feel their insurers are responding. In all, we surveyed 127 directors, non-executive directors, in-house lawyers, risk officers and compliance professionals, working in companies operating all over the world. We thank them all for taking the time to complete our survey and allowing us to create this market snapshot.

As we publish our fifth instalment of this research, and draw on six years’ worth of data, we can identify some themes and trends emerging around the subject of boardroom sentiment. We continue to see regulators driving further and further forward with an agenda of personal accountability. The number of respondents to our survey that have experienced a claim or investigation involving a director of their company continues to grow, reaching over one in three this year, as against one in five as recently as 2014

What does make it on to the agenda of directors and officers this year for the first time is the uncertainty surrounding macro-economic events: 38% of our respondents identified concerns in a post-Brexit landscape among the risks of greatest significance to their business, and 59% told us the current geo-political uncertainties create a significant additional risk to their businesses. This is why we have called this year’s report Entering Uncharted Territory.

There are other new risks on the horizon for executives from a regulatory standpoint too, and in this year’s survey we once again drew our respondents’ attention to several new pieces of proposed and actual legislation that serve to expand the risk of personal liability. For example, the Financial Reporting Council’s proposals to extend its sanction regime to all directors of UK listed companies, the General Data Protection Regulation, and the individual personal liability that board members can incur for incorrect tax returns in some jurisdictions, such as Italy, Germany and Greece.

When it comes to D&O protection, our respondents continue to tell us that they want policy terms that are clear and easy to follow, and this year many are also focused on restricting insurers’ ability to refuse a claim based on non-disclosure. Many worry about how claims against directors and officers will be controlled and settled, about whether their D&O policy and company indemnification will be able to respond to claims in all jurisdictions, and about the coordination of the D&O policy with a company’s indemnification obligations. Given the rising levels of personal liability, it is little surprise to see these issues on the agenda of directors and officers around the world.

We hope you find our coverage and analysis useful. Should you require any further information on any of the issues raised here, please do not hesitate to get in touch with us and with your usual contact at either Allen & Overy LLP or Willis Towers Watson.

Both Joanna and Francis would like to extend particular thanks to Madison Kaur, Emma Waters and Patrick Mayock from Allen & Overy LLP in connection with the analysis of data and writing of this report and Elliott Harvey and Bonita Johnson from Willis Towers Watson with their assistance on the survey.

Executive summary

When conducting the research for this year’s survey, we interviewed 127 individuals, comprising directors, non-executive directors, in-house lawyers, risk officers and compliance professionals.

Our respondents were split roughly equally between public and private companies and were spread across a wide variety of industries. In all, 37% were based in companies that conduct the majority of their business in the UK, while 33% described their businesses as global, 21% operated across EMEA, 6% in the U.S. and 5% in Asia Pacific.

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