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Risky days for outside directors

Risky days for outside directors

by Rick Turoczy on July 7, 2006

Following Enron and WorldCom scandals, and the Sarbanes-Oxley governance reforms that resulted, corporate board-sitting became a bit more professional — and much more public. The “casual director” no longer exists, reports executive search firm Korn/Ferry International.

In its annual survey of corporate boards, Korn/Ferry reported in February that 59 percent of directors said they had declined a board seat because of the “perceived risk” of personal liability in the job due to Sarbanes-Oxley. A nearly equal number — 58 percent — said they’d like to see SOX repealed because it has made boards overly cautious.

And it’s easy to see why directors may be nervous: Last year, 11 former directors of WorldCom — including Francesco Galesi, chairman of the Rotterdam-based Galesi Group — agreed to pay $55.25 million to settle a class-action shareholder suit alleging they failed to stop the $11 billion accounting scandal that brought down the company. Nearly half of the settlement money came out of their own pockets.

Risky days for outside directors

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