Introduction of Concept
Managing Boardroom Decision Making
The Transformation of Fiduciary Performance
Fiduciary Guaranty Corporation of America (FIG) addresses a fiduciary liability niche overlooked or under-addressed by the director and officer liability insurance market. A new fiduciary risk management service for the boardroom, denoted as the Fiduciary Guaranty ad hoc Decision AuditTM, represents the first bona fide loss-control mechanism ever introduced into the boardroom decision making and fiduciary liability marketplace. Fiduciary Guaranty (FIG) works from the premise that the predicate act of fiduciary performance is always a decision. The currency of fiduciary performance is decision making – especially, complex decision making under conditions of risk and uncertainty. The white elephant in the underwriter’s lounge of D & O liability insurance providers has, for decades, been their collective failure to create an objective, meaningful approach for directly measuring and evaluating the quality of fiduciary decision making in the boardroom. Fiduciary Guaranty (FIG) has aggregated the tools to slay the white elephant.
Fiduciary Guaranty (FIG) presents a remediation methodology for boardroom decision making that elicits a threshold of fiduciary decision making performance that is difficult for aggrieved stakeholders, including dissident shareholders or politically motivated regulators, to challenge. This means that – aside from the occasional manifestation of Murphy’s Law - the directors, officers and other corporate fiduciaries participating in the decision making process will never lose a fiduciary lawsuit brought against them for alleged violation of their fiduciary duty of care. This is achieved by establishing a refereed decision environment in which the decision making process is monitored and groomed in real time - inside the boardroom - by independent, third party experts.
The product performance indemnification provided by FIG is contingent upon the target decision making process having been properly “scrubbed and sanitized” by the evaluative and remediative metrics of the FIG ad hoc Decision AuditTM.
It’s like examining a residential property after the hurricane has hit – and then underwriting … with complete knowledge of the extent of the damage. (Remember – with fiduciary performance – the liability is about proximal damage, viz., the decision making process and terminal decision-product – not about the distal damage, e.g., the financial loss or erosion in share-price or compromise of competitive advantage.) By using a “heads-up” approach that indemnifies only pre-sanitized, no-risk events – FIG distinguishes itself from legacy D & O underwriting as a new genre of risk management protection for directors, officers and other implicated corporate fiduciaries.
The Achilles Heel of traditional D & O liability insurance has been the “catch-all” characteristic of the traditional D & O policy, viz., the unconscionably dangerous condition that any action or event that occurs - which appears to be the fault of the directors and officers (the fiduciaries) - gets marked as a violation of either the fiduciary duty of care or the duty loyalty. In a claims-made policy with the “catch-all” characteristic – loss-ratios are virtually uncontrollable – regardless of the experience of the underwriter.
The product performance indemnification available to CLIENTs contingent upon their compliance with the FIG ad hoc Decision AuditTM eliminates all of those troublesome liability elements that adhere to D & O liability insurance products.
PRODUCT INDEMNIFICATION LOSS-CONTROL FEATURES:
Ø Indemnification is based on an interlocking system of loss control mechanisms.
The decision making standard invoked by the
Decision Audit engagement makes it virtually
impossible for a plaintiff to challenge the
Indemnification only extends to decisions
that have been formally refereed and
certified by the ad hoc Decision Audit.
The first important implication is that
loose cannon actions by a careless or
maverick officer or director will never
inflict damage (on the Insured or on the
Carrier) because no coverage will apply.
Take the example of the
product performance indemnification is
contingent upon – among other factors – a
It is understandable why all parties to the
litigation often posture for and
subsequently adopt a negotiated out-of-court
settlement. None of them – neither the
A further control mechanism for limiting
indemnification claim-loss experience is
specific to our directly managing the
attorneys rather than permitting the
defendant-Indemnifieds to hire and manage
them – which means that we have to hire and
pay for the lawyers and the legal costs.
We choose to do that for two reasons
· Prior to the conduct of the Decision Audit in the Boardroom we investigate the contemplated type of decision event and examine the history of its litigation and adjudication in the specific jurisdiction of the client. If the Bench in that jurisdiction has included some atypical factor in writing its opinion – we want to know that before we intervene with the board. We want to be able to account for any obtuse judicial considerations by having some hints ahead of time.
· We look at the composition of ownership – how it’s distributed – how many large institutional investors with historically quick trigger fingers? What is likely to be their appetite for court-adjudicated litigation against this type of decision? Will they frame it as a care regime case or invoke the newer and more frightening loyalty regime violation?
We especially want to direct the specific
activity of the attorneys in the pre-trial
Discovery phase – the Depositions and the
Interrogatories. This is where the fiduciary
liability litigation is won or lost – and if
the lawyering is done properly at this stage
– the case never goes to trial. Following
completion of the Discovery stage
a decision making process and
approving a resulting decision product -
we further authenticate our
facilitative work with the FIG imprimatur -
an attest statement or opinion letter – just
like a CPA firm issues after it completes an
outside financial audit of a firm’s
financial statements and internal control
practices. As experts in the human judgement
that informs complex decision making we
attest to and certify that this corpus of
fiduciaries has complied with the highest
standards of decision making practice in
rendering this decision. Like accountants –
our opinion may be
As Dr. Peter Drucker often observed, “If you can’t measure it … you can’t management it.” The FIG ad hoc Decision AuditTM empowers the Client-Board to measure and manage its most critical decision making tasks.