ARM 55 Chp 7

director and officers liability loss exposures
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director and officers liability loss exposures
an understanding of the role of directors and officers in corporations and the types of suits made against them
corporations and the role of d&o
corporations is owned by its stockholders but controlled by its board of directors
directors
may be major stockholders and executive officers of the corporation
corporation's directors
are elected by its stockholders in accordance with the corporation's bylaws
major responsibilities and duties of d&o
1. establishing the corporation's basic goals and
policies
2. electing or appointing the corporate officers,
advising them, approving their actions, and
auditing their performance
3. safeguarding and approving changes in the
corporation's assets
4. approving important financial matters and
ensuring that proper annual and interim reports
are given to stockholders
5. delegating special powers to others to sign
contracts, open bank accounts, sign checks,
issue stock, obtain loans, and conduct any
activities that may require board approval
6. maintaining, revising, and enforcing the
corporate charter and bylaws
7. perpetuating a competent board by conducting
regular elections and filling interim vacancies
with qualified persons
8. fulfilling their fiduciary duties to the corporation
and its stockholders
fiduciary duty
The duty to act in the best interests of another.
fiduciary duties for directors and officers
1. duty of care(duty of diligence)
2. duty of loyalty
3. duty of disclosure
4. duty of obedience
types of suits made against d&o
1. derivatives
2. non-derivatives
3. class action
duty of care
act in good faith and in a manner, they reasonably believe to be in the corporation best interest
duty of loyalty
1. d&o cannot usurp business opportunities that
properly belong to the corporation
2. d&o cannot own or operate businesses that
compete with the corporation
3. d&o owe loyalty to stockholders
duty of disclosure1. d&o have the duty to disclose material facts to all persons who have a right to know such facts and would not otherwise be able to obtain them 2. d&o are not authorized to act as spokesperson for the corporation 3. d&o must refrain from discussing confidential or market sensitive matters with othersduty of obedienced&o are required to perform their duties according to federal and state law as well as the terms of the corporate charterderivative suitsa lawsuit brought by one or more shareholders in the name of the corporationnon derivative suitsmade by entities outside the corporation against directors and officersother entities that may initiate non derivative suits1. customers 2. competitors 3. employees 4. creditors 5. governmentclass action suita lawsuit in which one person or a small group of people represents the interests of an entire class of people in ligationindemnification of directors and officersif d&o successfully defended against a derivative suit have the right to indemnification from the corporation and reimburse them for expenses, they have paid to defend against the suitultra viresAn act of a corporation that exceeds its chartered powers.controlling d&o liability loss exposures1. adhering to the requirements of the sarbanes- oxley public company reform and investor protection act of 2002 2. establishing the independence of a corporate's board of directors 3. providing opportunities that encourage open, clear, and concise communication among d&o 4. ensuring that directors and officers fully understand the organization's operations, corporate charter and bylaws, and securities and antitrust lawsemployment practices liability loss exposure1. discrimination claims 2. wrongful termination claims 3. sexual harassment claims 4. retaliation claims 5. other types of EPL claimsdiscrimination claims1. overt discrimination 2. disparate treatment 3. disparate impactwrongful termination claims1. constructive discharge 2. employment at willovert discriminationA specific, observable action to discriminate against a person or class of persons.disparate treatmentunfavorable or unfair treatment of someone in comparison to how similar individuals are treateddisparate impactthe application of personnel policies to all applicants or employees that have the effect of denying employment or advancement to members of protected classesconstructive dischargeemployees who resign because of unendurable conditionsemployment at willlegal doctrine has allowed employers or employees to terminate the private employment relationship with or without cause at any timesexual harassment claimsare based on the allegation that the employer created a hostile work environmenthostile work environmentexists when an employee is subjected to sexual harassment that is so severe or pervasive that it alters the conditions of his or her employment and creates an abusive working environmentretaliation claimsmay be combined with claims of discrimination based on race, gender, age, or another protected classificationother types of epl claims1. mass layoff of employees at one time 2. overtime compensation 3. employees claimsfiduciary liability loss exposuresarise mainly out of the possibility that beneficiaries of an employee benefit plan may make a claim against the plan officials for breach of their fiduciary dutiestopics for those who seek to identify and analyze fiduciary liability loss exposures1. employee retirement income security act(ERISA) 2. the duties and liabilities of employee benefit plan fiduciaries 3. HIPAA of 1996ERISA1. the federal law that governs retirement and other benefit plans 2. enacted in response to abuses and underfunding in many benefit plans uncovered by congressional hearing followingduties and liabilities of employee benefit plan fiduciarieshas the specific duties pertaining to the particular function that the fiduciary is performing under the plan and a general duty to act solely in the interest of plan participants, to abide by the relevant dictates of plan documents, and to avoid acting in ways that are expressly prohibited by ERISAspecific duties of a plan fiduciary1. loyalty 2. prudence 3. diversification 4. adherencestandards and liability of fiduciary1. a fiduciary may be liable for the breach of a duty by another fiduciary if the first fiduciary knowingly participates in the breach, conceals it or makes no attempt to correct it 2. employer may be held vicariously liable for breaches of fiduciary duty committed by its employees or agentshippacalls for the protection of employee medical information and subjects the employer and fiduciaries to penalties for failure to complyhippa accomplishes 4 major objectives1. sets standards for health insurance 2. limits exclusions for preexisting medical conditions 3. prohibits discrimination in enrollment and in premiums charged to employees and their dependents based on health-related factors 4. improves disclosure about group health planstypes of personnel losses1. work-related injury and illness 2. retirement and resignation 3. work-related violencework related injury and illnessthe distinction between injury and illness is relevant because the types of risk controls often applied to reducing the frequency or severity of particular disabilities depend on whether those disabilities arise from sudden external events or from prolonged exposures to harmful conditions or from a sudden harmful condition that does not immediately manifest itselfinjury cause of lossthe majority of work-related in manufacturing and retail businessesillness cause of lossoften the result of prolonged exposure to chemical, biological, ergonomic, and physical forceswork related injury causes of loss1. machinery and equipment 2. materials handling 3. vehicle fleet operations 4. physical conditions of premisesmachine and equipment useincludes all mechanical devices that employees use or contact on the jobmaterials handlingall activities associated with moving material around the workplace-including raw material, components, work-in-process, and finished goodsvehicle fleet operationspresent acute physical causes of loss to drivers and passengersphysical conditions of premisesrisk management professional must consider the four interdependent elements of construction, occupancy, protection and external exposures (COPE)retirement and resignationthe loss to the organization is the future value that the individual would have provided the organization2 prevalent types of work related violence1. workplace 2. kidnap and ransom`workplace violencemay cause employees to be fearful or depressed, resulting in reduced productivity and increased rates of absenteeism, disability, and resignationkidnap and ransomthe employer suffers a loss, either temporary or permanent, of the employee's services, which results in a reduction of human resource potential of the organizationassessing personnel loss exposures1. information that is unique and proprietary to an organization 2. use information that is more standardized and publicly availablemethods used to identify and analyze human assets1. exposed to loss 2. the causes of loss 3. the financial consequences of the lossmethods risk managers use to assess personnel loss exposures1. risk assessment questionnaires 2. loss history 3. other records and documents 4. flowcharts and organizational charts 5. personal inspections 6. expertise within and beyond the organizationrisk assessment questionnairesuseful for identifying personnel loss exposures bloss historiesa source of internal information about the cause of personnel lossesother records and documentsUS census bureau, national center for health statistics, and the US bureau of labor statisticsflowcharts methodidentifies employees at critical junctions in an organization activityorganizational charts1. involves studying job descriptions to identify the most important positions 2. highlights key persons who exercise unique talents, creativity, or special skillspersonal inspectiona valuable method to help determine the extent of workplace hazards that may lead to death, disability, or voluntary separation of employees who were not identified by the other methodsexpertise within and beyond the organizationhuman resources, system safety engineers, or senior managerswork related risk control techniques to mitigate injury and illness1. avoidance 2. loss prevention 3. loss reduction 4. separation and duplicationavoidancereduces the probability of an activity's future loss zeroloss preventionused when avoidance is impossible or undesirablesafety engineering 2 causes of loss associated with workplace injuries and illness1. physical control 2. procedural controlloss prevention physical controls1. materials substitution 2. isolation 3. wet methods 4. guarding 5. ventilation 6. maintenance 7. housekeeping 8. personal protective equipment (PPE)loss prevention procedural controls1. process change 2. education and training 3. standard operating procedures (SOPs) 4. proper supervision 5. medical controls 6. job rotationworkplace design1. coordinates a work environment's physical features, devices, and working conditions with the capabilities of the people in that environment 2. can reduce work injuries and maintain product quality and operating efficiency when it is appliedmethods that fall into workplace design1. ergonomics 2. human factors engineering 3. bio-mechanicsergonomicsthe science of designing work space and equipment based on the needs of the people who use the work space and equipmenthuman factors engineeringA process that applies the knowledge of human behavior to design equipment people use on and off the job.biomechanicsa process that views people at work as special kinds of machines(skeletal levers) functioning within environments filled with other machinesloss reductionif associated with workplace-related injury and illness focus on rehabilitation, which is the process of restoring and injured and disabled person to his or her highest attainable level of functioning and independence in self-care, vocational, and recreational activitiesrehabilitationcan be physical, psychological, or vocationalseparationinvolves arranging an organization's activities and resources so that no single event can cause simultaneous losses to all of themduplicationinvolves creating backup facilities or assets to be used only if the primary activity or asset suffers a loss helps to offset the adverse financial effects of employee injuries and illnesses