Company director’s risk profile in D&O program is tied to company’s overall risk profile

The risk profile of a company director is increasingly becoming synonymous with the risk profile of the entire company, according to Jordon Solway, general counsel and vice president at Munich Canada.
Solway spoke at a D&O seminar sponsored by the Ontario chapter of the Association of Corporate Counsel (ACC) Canada. Held on Oct. 12, the seminar took place in Toronto at the office of Davies Howe Partners.
Solway’s presentation noted a company’s path to insolvency is much shorter as a result of the financial crisis. And as companies experience financial turmoil, directors and officers are increasingly becoming targets of lawsuits seeking compensation for damages claimed arising from insolvency or fraud.
Thus, when determining the correct D&O insurance coverage for a board director, it is important to get a handle on the risks associated with the entire company – including its governance structure, Solway said.
In putting together a D&O insurance program, “you have to go through everything that your business does, what the implications will be if it goes sour, and who will ultimately be responsible,” Solway said. “You do this because it’s very easy, in most cases – since businesses are so highly regulated – to impose personal liability against directors…
“The corporate risk profile is your director’s risk profile.”