D&O Insurance: Its Role in Recruiting Independent Board Members

D&O insurance is coverage for lawsuits and claims made against a company’s directors and officers. Let’s take a closer look at D&O insurance and its role in recruiting independent board members.

An independent board of directors is comprised of people who have no material interests in the company other than their directorship. In the last two decades, the concept of independent board members has increasingly become popular as investors demand good corporate governance. They are there specifically to help a company run honestly and efficiently.

D&O insurance coverage is essential and allows your leadership to make decisions confidently and without fear of personal financial loss. For startups putting together their board of directors, having an excellent D&O insurance policy can be a powerful recruiting tool. Potential independent board members who are savvy will inquire about the adequacy of your D&O coverage.

If an independent board member, director or officer makes a decision that leads to claims of mismanagement, breach of contract, breach of fiduciary duty, noncompliance with laws or regulations, or other similar accusations, those individuals are the ones in the crosshairs—not the company itself.

D&O insurance covers defense costs and settlements arising from demands and lawsuits brought against your company’s board of directors and/or board members personally for allegations of breach of fiduciary duty, misrepresentation, or errors & omissions. In essence, it shields your directors and officers from legal or financial liability, thereby preventing a situation where an executive or independent board member would be expected to handle costs related to a claim personally. It creates an environment where directors and officers can lead a company and make tough decisions without worrying about gambling their personal finances and assets with every choice.

In addition to its role in attracting talent and recruiting board members, check out these Top 5 Reasons to Purchase D&O Insurance. Interested in learning How D&O Insurance Protects the Founding Team? Or What Does D&O Insurance Cover? D&O insurance is a great financial tool for reducing risk. And there is nothing more important when it comes to protecting your company. Contact the experts at HRO Resources to get started with a quote today.