CLIENT ADVISORY
SERVICE ON OUTSIDE, HIGH PROFILE
FOR-PROFIT AND NOT-FOR-PROFIT BOARDS
It is safe to say that no one serving as a Director of a for-profit or not-for-profit entity is immune from Employment Practices litigation. Therefore, we caution our clients that serve high profile, for-profit and not-for-profit entities, such as banks, hospitals, and social service agencies that control assets in excess of $500MM, to anticipate a higher incidence of Employment Practices claim activity.
The following comments are offered for consideration:
1. Indemnification – Individuals who serve for-profit and not-for-profit entities should not be at risk for financial loss from an Employment Practices claim, given the indemnification provided by the institution. The one exception would be if there is an allegation that the person committed some illegal act.
2. There are two primary reasons for limiting services on high profile Boards:
• Time for the Judicial Process – A common complaint is the amount of personal time required in the event a lawsuit is filed. Many suits individually name each Board member. Travel plans and business operations take a backseat to the demands of the court, once a legal process is started. There is also the frustration factor as the proceedings move forward and personal schedules are disrupted to accommodate the requirements of the Court for hearings, depositions and trial.
• Confidentiality/Security – Being named in a lawsuit may expose Board members to public scrutiny of their finances, if it can be shown by the plaintiff that such information is material to the proceedings. Such disclosure is not in the best interests of high net worth families who wish to maintain confidentiality.
It is understood that serving as a Director provides a valuable resource to both the business and not-for-profit community. However, if a person is to serve on a high profile Board or Executive Committee, it should be with the understanding that the services will be provided on a term limited basis. Ideally, services should be limited to three to five years. In addition to the term limitation, it is suggested that family members limit their service to a high profile Board to not more than one high profile Board per person, per year.
Feel free to call should you wish to discuss these comments and recommendations.
Ken R. Butler
KRB/md
Service-HighProfileBoards
Ken R. Butler is the President & CEO of Legacy Risk Solutions, LLC. Mr. Butler is an entrepreneur and industry leader in the analysis of affluent family and business risk management needs and development of legacy preservation plans.
Fee Only – No Commissions – No Conflict of Interest
This article is a general discussion about the subject matter and should not be represented as applicable in any state in the United States of America. this document is for the exclusive use of Legacy Risk Solutions, LLC clients. It shall not be reprinted or portions reproduced in any form, by any other party, without the permission of the author. Author Contact: 330.659.6337 or 330.283.0952, or KenBLegacy@aol.com. The Legacy Risk Solutions website is: www.legacyrisksolutions.com.
