Last month, I had the distinct honor and pleasure to participate in a panel discussion at the Professional Liability Underwriting Society’s 26th Annual PLUS International Conference on Global D&O: Navigating the Exposures of Multinational Companies. For me, it sparked a moment of reflecting on how far we’ve come in our appreciation and understanding of the challenges facing today’s global executive as well as the opportunity to speculate on what is still to come.
During the wide-ranging conversation, the panelists targeted three major areas of risk facing today’s global executives.
The Court of Public Opinion: Litigation vs. Reputation
Fortunately, we didn’t have to begin the discussion by first persuading those in attendance that there actually were global exposures – meaning risks outside the U.S. – facing executives and firms today. This was a given for the audience and the panel.
Rather, fellow-panelist Lanny J. Davis, of Lanny J. Davis & Associates, kicked us off describing a new world order where companies and individuals are tried first in the “courts” of social media, where the rules of law and the conventions of good journalism may not apply. In these forums, personal reputations, a company’s stock price and a global brand are all at risk.
Critically, for several of us on the panel, while directors and officers (D&O) liability insurance is designed to respond to the ensuing litigation, it does little to repair reputations. I have long been a proponent of D&O policy extensions designed expressly to provide media relations coverage, and Lanny’s able and passionate advocacy for legal crisis response reminded us all that there is more, potentially much more, to a successful outcome than winning at trial – assuming the issues are ever tried before a judge or a jury.
Morrison Globalizes Litigation
A few years back, the U.S. Supreme Court issued a decision seen as a godsend to many an international organization in Morrison v National Australia Bank. The result of this was to deny access to the U.S. courts for cases where non-U.S. shareholders had purchased shares of non-U.S. companies on non-U.S. exchanges (the so-called F-cubed cases). U.S. shareholders holding shares purchased in the U.S. could get their day in a U.S. court—but all others where potentially “deported” to other jurisdictions.
The result of Morrison, in part, has been more local D&O litigation around the globe—as vividly illustrated by a map of today’s “hot” countries for companies and executives, presented by fellow panelist Edward Smerdon, a partner at Sedgwick Detert Moran & Arnold. His map provided a thought-provoking trip round the world—though Ed did clarify that the only truly red “hot” country was the U.S., which was not highlighted on our map. The other countries really being more appropriately viewed as “tepid” jurisdictions in comparison. But with the focus of the session on non-U.S. risks, the U.S. of A. was not part of our briefing.
Boards Gone Global (Really)
Fellow panelist Chris Magee, a Managing Partner of Berkley Professional Liability UK, and I were in agreement about the interesting result of U.S. companies re-domiciling abroad (outside the U.S.) while keeping their U.S. securities listing and shareholder base: as the local sister companies of the U.S. underwriters are seen to offer the same or better terms and conditions of coverage at significantly discounted rates.
A true win-win for the buyers, many of whom are often confused by this turnabout as they do not perceive their inherent exposures as significantly decreasing due to a change in the country of domicile of the parent organization. Rather, they realistically see their risks as the U.S. plus an overlay of requirements and potential liability arising from their new local abode.
All in all, at least for those of us on the panel, it was an interesting and thought-provoking session.