From the Society for Corporate Governance Society Alert: In this article, “Has D&O Liability’s Dangerous Twin Arrived?,” a specialty insurer posits that increasing public scrutiny of directors and officers is creating reputational risks that may not be addressed by traditional D&O liability coverage.
Reputation risk is manageable rather than merely meteorological. A board that has neither governed its reputation risk nor transferred it has a plausible negligence story forming against it—in the court of public opinion first, and potentially thereafter in courts of a more formal variety.
Has D&O Liability’s Dangerous Twin Arrived? D&O liability insurance—the governance safety net predecessors fought to establish forty years ago—does not respond to D&O professional disability. D&O reputation insurance does.
If reputation risk is real, directors and officers stand to be professionally disabled by a crisis exploited by investor, social or political activists.
Captive programs can extend to cover corporate and D&O reputation risk — a strategic governance safeguard.
Podcast #11: Boards Reject Personal Reputation Harm as the Price of Board Service: D&O Reputation Insurance Enhances Governance: In this episode, after an outspoken director on the board of Netflix finds herself in political crosshairs, directors demand protection from the personal cost of chaos-driven events.
To recruit and retain robust diverse boards, companies need the protection of Steel City Re’s Side R® D&O parametric reputation insurance.
The shifting landscape of social and cultural norms have made reputation risk—which threatens liquidity—more prevalent, costly to firms, and personal to corporate leadership. Risk professionals are now describing reputation risk as a threat to resilience rather than a PR problem. Communications executives are using new reputation risk governance and management intelligence tools, and both the American Law Institute and the DCRO Risk Governance Institute are recommending reputation insurance for companies and their boards.
Good governance does not shield directors from liability risk nor reputation risk. The former is the hard lesson learned by everyone in the mid 1980’s; the latter is being learned now. The reputations of board members have increasingly become targets in a time of heightened activism and social media activity. Read the article in Directors & Boards to learn what experts say directors should do.
Personal attacks on directors are now a governance weapon – amplified by activists, media, and social platforms. Traditional protections (proxy advisors, board slates, collegiality) are eroding. Reputational harm can drive board turnover, litigation, and long-term career damage. Emerging responses: (1) Hazard pay for directors; (2) Reputation insurance alongside D&O coverage. Oversight of reputational risk is mission-critical. Boards must exercise foresight: how is reputational risk being integrated into risk management, who is responsible, and how is the company mitigating it?