Corporate Governance: Managing the Risk

By Barry Reiter and Aaron Emes

Published in Lexpert, November 2005.

Our October 2005 article described increased personal risks faced by directors and officers of public companies in the current corporate governance climate.

Due diligence

. Exercising due diligence is the most important advice for directors and officers. It is very unlikely that a director or officer will be held liable if appropriate care was taken in coming to a decision. This means ensuring that there is timely, adequate and appropriate information on which to reach a conclusion. For significant decisions (i.e., a merger transaction or other company altering transaction), one board meeting to approve the transaction may not be sufficient; rather, a number of meetings as the transaction develops, with significant input from outside experts (including lawyers and financial advisors), will likely be required.