Outside directors of public companies play a central role in overseeing management. Nonetheless, they have rarely incurred personal, out-of-pocket liability for failing to carry out their assigned tasks, either in the litigation-prone United States or other countries. Historically, as threats to this near-zero personal liability regime have appeared, market and political forces have responded to restore the status quo. We suggest here reasons to believe that this arrangement is justifiable from a policy perspective, at least in countries where reputation and other extra-legal mechanisms provide reasonable incentives for outside directors to be vigilant.
|Original language||English (US)|
|Number of pages||16|
|Journal||Journal of Institutional and Theoretical Economics|
|State||Published - Mar 1 2006|
ASJC Scopus subject areas
- Economics and Econometrics