Where Have All the CEOs Gone?

As the year comes to a close, 2005 will be marked as a leading year of Chief Executive Officer (CEO) turnover.[1]  With
1,100 CEOs having already left this year, departures have already
exceeded the previous high set in 2000 when the dot-com bubble burst.[2]  The
trend is a bit surprising as the economy and corporate profits have
both been on an up swing this year. While it might be easy to attribute
the exodus rate to the impact to the pressures of compliance with
Sarbanes-Oxley, there are other factors that seem to provide a better
rationale for this year’s trend.

It should be noted that the majority of CEO departures this year have been voluntarily.  In October, one of the highest departure months with 96 exits, only 5 CEOs left as a result of corporate scandals.[3]  Hence, the majority of this year’s increased rate is not Read the rest

D&O Insurance Coverage: What is it good for?

Corporate scandals over the past few years have been numerous and high-profile.  As a result, the conduct of directors and officers of corporations have become subject to a high level of scrutiny.  In
addition to the public keeping a keener eye on the activities of
corporations, the Sarbanes-Oxley Act of 2002 has increased the
potential liability of directors and officers. [1] The Act, having
established new fines and penalties for the corporate board, has had
the incidental effects of causing the price of director and officers
(D&O) liability insurance to rise dramatically and of creating a
need for more sophisticated D&O insurance.  While
D&O coverage does exist, albeit it with higher deductible and
limited coverage, a recent case demonstrates how directors may still
bear the costs of litigation even with a policy. [2]

In
a recent case from the U.S. district of Arizona dismissed the bad faith
Read the rest

Bankruptcy Abuse Prevention Takes Aim at Attorneys

"I don't
think you can make a lawyer honest by an act of legislature. You've got
to work on his conscience. And his lack of conscience is what makes him
a lawyer." [1]

While
the lawyer joke is an art form dating back centuries, it is not
actually the case that firms throughout the country are staffed with
snakes, shysters, and snollygosters. Nor is there much evidence that
attorneys who counsel clients through bankruptcy proceedings are a
particularly shady lot. So it has come as a surprise to many attorneys
that Congress has enacted strict requirements, backed by monetary and
criminal sanctions, for attorneys practicing in consumer bankruptcy.
The burden of personal liability raises fundamental questions about the
role of the attorney and the sanctity of the attorney-client
relationship under the new bankruptcy law.

As
a whole, the Bankruptcy Code as currently in effect reflects an
underlying disapproval of bankruptcy … Read the rest