Published by:
Harvard Business Publishing
Length: 5 pages
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https://casecent.re/p/46998
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Abstract
The economics of serving on the board of a publicly held corporation are fundamentally off balance. The risk to a director''s time, money, and reputation is far greater than the rewards. No matter how conscientious directors are, shareholders can easily file frivolous lawsuits against them. Resolving a lawsuit saps a director''s time and money; settling one appears to be an admission of guilt and is a black mark on his or her reputation. The boards of public companies should be more like those in LBOs or venture capital situations, where directors have a big financial stake in the company and thus the incentive to make it successful.
About
Abstract
The economics of serving on the board of a publicly held corporation are fundamentally off balance. The risk to a director''s time, money, and reputation is far greater than the rewards. No matter how conscientious directors are, shareholders can easily file frivolous lawsuits against them. Resolving a lawsuit saps a director''s time and money; settling one appears to be an admission of guilt and is a black mark on his or her reputation. The boards of public companies should be more like those in LBOs or venture capital situations, where directors have a big financial stake in the company and thus the incentive to make it successful.