Corporate Governance in the Aftermath of the Insurance Crisis
The core question corporate law is this: how do we structure managers' incentives to ensure that they work in the shareholders' interest? One strategy views the board of directors as a monitor of managers. In the mid-1980s, as claims against directors significantly increased, the market for directors and officers (D & O) liability insurance experienced what observers considered an acute crisis: that is, availability shrank and premiums skyrocketed. This crisis threatened the board's stability as a governance structure capable of protecting the shareholders' interests. Since the board shapes the cor____________________
ROBERTA ROMANO is professor of law at the Yale University Law School and School of Organization and Management. She is coeditor of the Journal of Law, Economics, and Organization and the author of numerous articles on corporate law. Prior to coming to Yale in 1984, she was associate professor of law at the Stanford University Law School, and served as law clerk to the Honorable Jon O. Newman, United States Court of Appeals, Second Circuit. Professor Romano is chair of the Section on Business Associations, Association of American Law Schools.