4 Nevertheless, the WorldCom and Enron settlements were a wake-up call in boardrooms across the country that the days of the rubber-stamping, old-boy-network board of directors were gone. 3 Such payments are rare because company charters often include provisions that make the corporation responsible for judgments against directors, and directors are further protected by insurance. 2 Nevertheless, many directors have been scrambling to their lawyers for advice since former Enron and WorldCom directors agreed to pay millions to personally settle shareholder suits. To successfully defend themselves, directors need only show that their decisions were “business judgment” made in good faith and not recklessly. 1 But the AIG directors’ wish for individual counsel during a critical decision reflects a new level of anxiety over legal liability in corporate boardrooms: an increased sense among directors that they need to worry about their own performance and liabilities.Īlthough directors theoretically can be held liable for any mistakes made on their watch, there is a high legal standard for proving individual liability. “Hank” Greenberg, many had an unusual question: Could they bring their own counsel along? Of course, the directors’ personal lawyers were not allowed into the meeting-only counsel retained for the group as a whole. Sometime in March 2005, when American International Group (AIG) independent directors met to determine the fate of Chairman Maurice R.

Business judgment rule