Daily Journal Corporate Governance Forum Protecting Against Liability November 15, 2017 Panelists: Michael Charlson, Litigation Partner, Vinson & Elkins LLP Joyce Cartun, Vice President Legal, Lam Research Rodney Choo, Senior Vice President, Arthur J. Gallagher & Co.

Topics Sources of Director and Officer Liability Major Categories of Claims – Similar for Public and Private Companies Securities Violations Breaches of Fiduciary Duty Employment-Related Claims Regulatory Violations ERISA and Related Fiduciary Claims But the nature of those claims tends to differ Process as a Way to Limit Liability Functional, engaged Board Director selection Effective committee structure Documentation Of actions and reasons for them Of contracts Of employment terms and compensation Appropriate use of management, outside experts, and counsel Process, but not at the expense of substance

Topics Indemnification and Liability-Exculpation Provisions Permissive versus mandatory Use of separate indemnification agreements Limitations on what conduct can be indemnified Compliance Programs Tone at the top/Codes of Business Ethics Hiring decisions Cost-benefit trade-offs Compliance procedures Internal controls One size does not fit all Regulatory environment in which the company operates International operations Interaction with auditor requirements

Topics D&O Insurance Other Techniques Public versus private Key differences in terms and conditions EPL coverage Fiduciary liability coverage Key differences in cost Differences in claims experience Looking to the future Separate Side A coverage Other Techniques Forum-selection provisions Arbitration/other ADR provisions Liability limitations by contract

Private D&O Litigation Trends 5

Low Severity Probability: Private D&O Private D&O Loss Trends Low Severity Probability: Private D&O Probably of having a D&O loss in excess of $1M remains low $387,000: average reported Loss in most recent Chubb D&O Survey, with maximum reported loss of $17M Prior Chubb report showed an average loss of $698,000 Types of Claims: 38% - employment-related / 25% - derivative shareholder / 19% direct shareholder / 19% - regulatory / 19% fiduciary / 25% other 6

EPL Loss Trends 7