Two recent lawsuits alleging director and officer liability have also called for board refreshment because of culpability. This emerging strategy to pressure directors to settle exposes directors to going-forward personal financial and reputation loss that is rarely covered with conventional liability insurance and is not yet widely covered with reputation insurance.
Plaintiffs suing Wells Fargo, pointing to firm’s history of reputation-damaging scandals, have asked the judge for permission to nominate three members of the bank’s board. Demands for board refreshment in shareholder lawsuits could become “a standard pressure strategy because it exposes directors to uncovered personal financial loss,” Kossovsky said, adding that such a loss would not be covered with conventional liability insurance because it is likely out of scope, “and not with parametric reputation insurance, because most boards still don’t carry it.”
Podcast: Target’s stock price drop suit calling for a board refreshment convinces directors to mitigate humiliation risk with reputation insurance.
DEI-linked stock price drop lawsuits may lead to painful board exit conversations and impair board member’s’ personal reputations. “Companies are going to be scrutinized for the statements and positions that they’ve taken in these areas,” said Troy Harder. “I wouldn’t be surprised to see a lot more lawsuits like this.” […] “(H)ow companies monitor risk matters just as much as how they disclose it,” Jennifer Wu, an assistant professor of finance at the University at Buffalo’s School of Management, told Agenda. That’s why Steel City Re developed a comprehensive reputation risk monitoring, management, and insurance solution.
86% of the Global Risk Advisory Council believe reputational risks will increase over the next quarter. The Global Risk Advisory Councilncounts more than 100 members, including the likes of former CIA Director Leon Panetta and MI6 Chief Sir Richard Dearlove as well as former heads of state and CEOs.
Governance today is a balancing act necessitated by the backlash to ESG and DEI policies. Searches for “reputation insurance” are surging.
There are 45 companies (combined value $10 trillion) on the MAGA anti-DEI hit list.“The worst thing that can happen to a company is: You’re still on that list, but you’ve lost all your good faith and credibility with folks on the other side of these issues.” We call this situation a reputation crisis and a clear need for reputation insurance.
Great companies with the most sophisticated boards will sometimes disappoint stakeholders. In our increasingly chaotic economic and political business environment, some customers, employees, regulators or investors will feel betrayed and act. This class action was filed against Target and thirteen of its Directors. In May 2023, Target faced immense customer backlash to its ambitious LGBT- “Pride Month” marketing and sales campaign, one of its featured ESG/DEI initiatives. […] The Complaint alleges that during the Class Period, Target failed to warn investors of risks associated with its mandates regarding its ESG/DEI initiatives and that this deceit, through misleading statements in the Company’s public filings, caused Target’s investors to purchase Target stock at artificially inflated prices and to unknowingly support Target’s Board and management in their misuse of investor funds to serve political and social goals.
Affirming in practice what it disclosed in January, Blackrock “engaged 2,683 times on strategy, purpose and financial resilience-related themes with 2,014 companies — more than any of its other engagement priorities — this proxy year. Given this information, board directors may want to prioritize financial resilience in their own work and in engagement with index funds.” Steel City Re can provide metrics and tools to support innovative strategies for strengthening financial resilience.
5-Minute Adventures in Risk & Resilience: The Podcast Reputation Insurance Forestalls ESG Risk at a $20bn Commercial Services Company: Protecting ESG Value Before Someone Else Challenges It.: In this episode, After Anheuser Busch’s incident with Bud Light, a risk executive realizes that his reputation risk insurance strategy also works for ESG risk. Click on the …