In a Sunday business section of The New York Timesthere was an article concerning the Wells Fargo mess, which has dragged directors and officers into a plaintiveslawsuit.
There are 15 current or former directors, and 4 current or former Officers - as named defendants.
The case is being heard in U.S. District Court in San Francisco by Judge Jon S. Tigar. Judge Tigar allowed the case to go forward by stating the directors had consciously disregarded an obligation to be reasonably informed about the business and its risks, or consciously disregarded the duty to monitor and oversee the business. As to the officers, “it is implausible” that Wells Fargo senior management ---- was unaware of the alleged fraud.
Questions if the plaintiffs prevail:
a. Does the D & O insurance cover this type of liability?
b. If so, is the insurance policy large enough to cover a settlement or award? If not, will the defendants be personally liable, as were the WorldCom directors who paid out close to 25 million dollars?
c. What impact will this have, if any, on the ability to recruit qualified personnel to fill a director’s seat?
This outcome of this case could change the dynamics between board members and a company’s Executive Suite!
Ref: The New York Times, Sunday, November 5, 2017