CEOs, presidents, boards and other officials are often the public faces of a business. These individuals or groups often have a lot of ways to decide the course of the organization. Many important choices rest on their decisions. As a result, their actions can extend far beyond the boardroom.
So, what happens when company actors make decisions or mistakes that harm a stakeholder? The stakeholder might feel they need certain monetary compensation. They might hold both the company and the directors responsible for these actions. Under such conditions, a directors and officers (D&O) liability policy might come in handy.
What is D&O Insurance?
Let’s say that during an earnings meeting, a company’s CFO informs stockholders of projected growth. However, rather than seeing gains in the next quarter, things go south. Poor stock performance causes financial losses for the shareholders. They might claim that the directors misrepresented their confidence in stock performance. So, the investors decide to take action, and sue the company and directors for these mistakes.
Here’s where D&O insurance can come in handy. It can extend liability protection specifically to the risks posed by officers. Therefore, if the directors and officers take a hit, this coverage can protect them. It might help them settle with the affected parties, as well as cover resulting legal fees. These policies can also protect the company itself. Businesses might not have to shell out profits in order to settle the damage. This might prove critical to protecting the company’s bottom line.
Protect Your Company Leaders, and Make the Company Better
It’s somewhat easy to see why company directors need the security of D&O insurance. Most professionals want to protect themselves in case they make mistakes. They like to see a company that will protect them in case of an alleged wrongdoing.
When companies offer this coverage, they might actually see an increase in their ability to retain talent. As a result, D&O coverage can help improve a company’s overall reputation. It might serve as a catalyst to make the company more trustworthy.
The impact of D&O insurance on a company’s ability to grow and change might prove beneficial. Clients might feel more secure investing in or receiving services from the company. Therefore, you should use it as a tool to improve the company’s profile. Don’t go without D&O insurance. It could prove very beneficial to your company down the road.