Settlement In Just For Feet Case May Fan Board Fears
This article discusses one of the largest out-of-pocket settlements paid by directors of a company because they were afraid of personal liability. Most of the time companies cover their CEO's liabilities. In this case the company's funds were exhausted and the directors had to pay $41.5 million to escape further repercussions. Peter Lattman mentions the Stanford Law Review and quotes Professor Klausner in this context:
... "Stanford Law Review, Stanford professor Michael Klausner and two co-authors identified only 13 cases in 25 years in which outside directors of public companies had made out-of-pocket payments. Directors may have to pay personally 'when a company's insolvent, insurance is inadequate, the directors have access to considerable wealth, and the merits of the case are reasonable,' Mr. Klausner said in an interview."