Policy Recommendations: Improving Deterrence

in Ensuring Corporate Misconduct

Published by University of Chicago Press

Published in print January 2011 | ISBN: 9780226035154
Published online March 2013 | e-ISBN: 9780226035079 | DOI:
Policy Recommendations: Improving Deterrence

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This chapter, which sums up the key findings of this study on the impact of directors' and officers' liability (D&O) insurance on shareholder litigation, concludes that D&O insurance as it is currently structured significantly undermines the deterrence value of shareholder litigation. It discusses the ways by which D&O insurance theoretically might preserve the deterrence function of shareholder litigation. These include pricing coverage to risk, monitoring corporate policyholders during the life of the contract, and using moral hazard claims defenses to force defendants to pay more toward the defense and settlement in those cases in which there is greater evidence of genuine wrongdoing.

Keywords: D&O insurance; shareholder litigation; deterrence function; risk; coverage pricing; moral hazard; insurance monitoring; corporate policyholders

Chapter.  14174 words. 

Subjects: Company and Commercial Law

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