Trump and Lieutenants, Their Impact to Directors and Officers

The ABD Team recently hosted The Women’s General Counsel Network (“WGCN”), to discuss the Trump’s Administration effect on companies. The WGCN is an invitation-only group dedicated to supporting its high-achieving members through a peer network.

The WGCN sought to understand Trump Administration changes currently in the pipeline from a health care perspective and a director and officer liability perspective, and their effect on a general counsel’s and company’s interaction with an insurance broker. This brief summary covers the D&O perspective.

Strong bias in favor of corporations and big business are most people’s initial impression of the next four years under Trump. Trump critics think it will be a free hall pass. This impression is based on Trump himself, and Trump’s appointments of persons who have strong ties to, or are on record of being sympathetic to those business, including Neil Gorsuch as the newest Justice to the U.S. Supreme Court, Jeff Sessions as Attorney General, and Jay Clayton as Chairman of the Securities and Exchange Commission. The impressions are founded. For example, Justice Gorsuch wrote a white paper as well as authored an amicus brief for the U.S. Chamber of Commerce while in private practice, where he suggested reform of securities litigation practices to include a stricter proof by plaintiff for damages, and lowering plaintiff fee awards, as ways to discourage meritless class action suits.

Our message to WGCN and to directors and officers, is to look beyond first impressions. While corporate accountability may decrease, individual accountability is likely to rise under the Trump Administration. Trump and his lieutenants could seek to bypass the corporate entity and hold business leaders and gatekeepers accountable for their bad actions. For example, Jeff Sessions has expressed his skepticism whether deferred prosecution agreements are effective against corporations as compared to prosecution of individuals. We have engaged in discussions with senior representatives of the SEC and U.S. Attorneys’ Office. Their statements indicate support for our belief that government agencies will focus keenly on prosecuting non-controversial cases, such as insider trading, fraud tipped by whistle-blowers, and illegal payments under the Foreign Corrupt Practices Act. These kinds of violations are things that folks on Main Street can easily understand as an unfair and illegal opportunities seized on by directors, officers and gatekeepers of corporations.

Protection of directors and officers through strong indemnification agreements and a broad D&O insurance policy, is pivotal when individuals are the focus of an SEC or Department of Justice investigation. Differences in D&O policy terms can greatly impact the funding of defense costs, and even whether or not the D&O policy can be nullified.

We invite you to contact us with any questions or comments about your D&O policy. For more information, please contact us.

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