As a reporter, I’m naturally interested in Fox News’ recent legal troubles. But corporate directors might also want to pay attention.
Here’s a refresher: Dominion Voting Systems charged that Fox News anchors defamed the company when they repeatedly aired lies about Dominion’s voting machines, blaming the technology for Donald Trump’s defeat in 2020. Through sworn testimonies with Fox executives, it became clear that the news empire’s top brass did not believe the machines were rigged to steer the election. Rather than go to trial, Fox paid Dominion a stunning $787 million.
But it isn’t only [hotlink]Fox News that might be held liable for spreading falsehoods. A Fox Corporation shareholder filed a lawsuit against four board members, including Rupert Murdoch and his son Lachlan, alleging the directors failed to provide proper oversight when they didn’t stop anchors from uttering the bizarre accusations.
Normally, such lawsuits are a long shot, and many do not survive motions to dismiss. But the Dominion outcome may bolster this case and any looming challenges against Fox board members. After all, Murdoch himself later wished he’d put a stop to the conspiracy theories. That Fox’s calculations at the time appeared to be part of its business strategy, not just a failure of oversight, may open up new legal questions about such “Caremark” cases writ large.
That last point could become a discussion that boards should follow. In the meantime, directors might be watching events like the Fox News case or SVB’s collapse, and the rise of ESG claims, and thinking about how well protected they are from legal woes. Even if you’re not planning to spread crackpot theories designed to undermine U.S. Democracy, you may want to revisit the terms of your Directors & Officers (D&O) insurance.
Peter Gleason, CEO of the National Association of Corporate Directors, says the success rate of shareholder lawsuits has remained “remarkably stable” over time, while the underlying issues have changed. Looking ahead, he says, board members could face legal challenges for failing to disclose or provide adequate oversight of matters like climate responsibility, cybersecurity, and human capital.
Public company board members are obligated to have D&O insurance. Private company board members, however, may want to rethink joining a board if D&O isn’t offered, says Gleason. “Insist on D&O insurance. The more, the better.”
Finding the right policy for your company takes research, but Gleason shares some broad tips:
– Find a broker who knows all the D&O insurers and relevant trends. “In choosing an insurer, select one that can do specialized underwriting so that it focuses on your risks,” Gleason says.
– If you have a claims-based policy, give timely notice of a lawsuit or potential lawsuit, and consider purchasing a “tail” to extend the time of notice.
– Read and understand your policy, and see if any exclusions leave you vulnerable. If they do, “push back.”
Lila MacLellan
[email protected]
@lilamaclellan
Noted
"It has become part and parcel of being a public company director that you will likely, at some point in the lifecycle of a company, get sued.”
—Louis Lehot, corporate and securities attorney at Foley & Lardner, at an NACD webinar last month
On the Agenda
👓 CHRO burnout is more than a culture problem. Frazzled people leaders, juggling more talent issues than ever, can make biased and short-sighted decisions, wreaking havoc on operations and employee engagement, Coins2Day’s Amber Burton finds. Her reporting includes tips to short-circuit this doom loop.
🎧 A.I. Assistants in the workplace are not just inevitable; they’re waiting in the lobby. An Iowa State University scholar shares highlights from her research into how well humans will get along with their robot underlings for The Academic Minute.
📖 Disney’s lawsuit against Florida Gov. Ron DeSantis is a good read. CNN posted the 77-page document in its entirety.
In Brief
- Biological regulation makes life possible in the same way that market rules make economies work, say historians Naomi Oreskes and Erik Conway in an interview with The Guardian. Their new book looks at the dubious history of regulation-bashing, dating back to the 1930s, and calls for corporate leaders to let go of the “free market” myth.
- In Europe, ESG investing isn’t controversial or politicized, but it isn’t uncomplicated, either. Bloomberg examines what the U.S. Can learn from the EU’s recent stumbles.
- Corporate leaders have a blind spot when it comes to potential legal and economic liabilities: reckless political spending. The Center for Political Accountability suggests firms monitor donations to super PACs the same way they track philanthropic contributions, lest they unwittingly fund candidates who oppose the values of the company, its employees, customers, and shareholders.
- Conferences are making a comeback, but regular business travel may never hit pre-pandemic levels, according to a new survey from Deloitte. Companies are cutting back on trips with both climate and budget concerns in mind.
Editor’s Pick
In The Atlantic, Amanda Mull makes a nuanced point about why we should mourn the loss of big-box stores like Bed Bath & Beyond. Although such retailers were part of a wave that put many mom-and-pop shops out of business, she writes, they nevertheless brought people out of their homes and into public spaces while supporting jobs that generated person-to-person exchanges. Bed Bath & Beyond’s bankruptcy comes as we hurtle toward a bleak future where online platforms eliminate shop life entirely, and retail work only happens in warehouses and delivery trucks.
Here’s a snippet:
“A reversal in course to the immediate past—the era of slightly smaller, better-differentiated big-box chain stores like Bed Bath & Beyond—wouldn’t do a great deal to solve this problem. These stores were just an earlier phase of what we have now, created by the same financial efficiency seeking. Still, losing them is no great victory. It won’t dampen America’s rabid overconsumption; it will simply change the channels through which it occurs. What will replace the spots vacated by public-facing businesses is, so far, not something more fun or vibrant or fulfilling. It’s not something that encourages people to learn how to navigate a city or try new things or leave their home and interact with the world. So far, it’s usually nothing at all.”
Read the rest here, and get out of the house this weekend.
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