1. 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.

2. 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

3. 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

4. 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

5. Private D&O Litigation Trends5

6. 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

7. EPL Loss Trends 7