Do you know about the types of risk that corporate directors are increasingly facing? I’ve been talking quite a bit about various types of risk, and Earl Altman recently asked, When are directors liable to employees for debts of the corporation? He says:
“Since the inception of limited liability, corporations have sought to avoid payment of various debts by hiding behind what is referred to as the ‘corporate veil’. Some of these efforts have been so flagrant a misuse of the principle that courts have struggled to ‘pierce the corporate veil’ and impose legal liability on directors of the corporation for certain conduct.”
However, many offended parties do manage to pierce the veil, and Ogilvy Renault outlines the risks and how directors can protect themselves in its recent guide, Identifying and Managing the Risks of Corporate Directorship. Employees, other individuals and government authorities are suing corporate directors for failing to comply with their duties under contracts, employment standards legislation and other areas, particularly relating to unpaid wages and vacation entitlements. Even corporations themselves, or their shareholders, have taken to suing their directors when they have failed to fulfil one or more of the duties they owe their corporation.
The Ogilvy Renault guide looks at the main sources of risk that directors face and a number of strategies to reduce the risk and defend against potential legal action. It’s short, clear and worth a look. Of course, no brief guide can stand in for the advice of legal counsel combined with a strong policy manual.
First Reference Human Resources, Compliance and Internal Controls Editor