The Liabilities of Your Business’s Executives

It’s no secret that businesses are commonly sued, and for a wide range of reasons. The last thing your company needs is a lawsuit that could have been avoided. No matter who filed the lawsuit or the scale of the case, it can cause significant damage to your company.

Executives, due to the nature of their roles as leaders of their companies, have their own unique set of liabilities, covered by a separate form of insurance (your standard E&O or professional liability insurance policy will not be sufficient for claims involving executives). Here are some executive liabilities to remain conscious of. 

Insider Trading

Many CEOs continue to trade their company’s stock ahead of corporate news that later affected their share prices. The Department of Justice is keenly aware of this, and they are heavily focused on nabbing those involved in insider trading. Avoid insider trading by eliminating the temptation. Create a trading plan showing you have predetermined the time and price at which you will sell stock. This plan would document that your trades were made legally and even if you had access to nonpublic information, it did not affect your decision to buy or sell stock.

Social Media 

Social media is both a blessing and a curse for many businesses. When executives use these platforms to relate to clients, they often end up in hot water over impulsive posts. Hastings has been accused of providing selective disclosure of information to investors. Public companies should disclose material information through public filings or press releases, not via social media. If you are questioning the content of your post, send a simultaneous press release to cover yourself legally. Social media is also a breeding ground for other problems, including harassment. Executives must be extremely careful with their conversations via social media and always act in a professional manner while representing the company online. 

Communication

It is crucial for executives to keep a healthy line of open communication in their companies, not only to create a strong culture but also to avoid lawsuits. Ensure that your company’s compliance program encourages internal reporting of violations of the securities laws and that complaints are handled properly. Consider hiring an attorney to draft or review your company’s handbook to ensure that operations are in compliance with the National Labor Relations Act.

Training

All executives must have human resources training! Never assume that they are equipped to handle every employee issue. Train executives in good practices regarding hiring, performance management, disciplinary actions, and terminations. Improperly trained employees cause lawsuits and mishaps are inevitable; which is why executive protection insurance is so important. Enforce clear training procedures and ensure your executives understand exactly what is acceptable in your company.

If a lawsuit does arise, contact a lawyer and your executive protection insurance provider immediately, as a delayed response can damage your brand and reputation. Seek counsel who is willing to properly evaluate the risk level of the lawsuit. Is it routine risk, complex risk, or risk that could put you out of business? Let your attorney analyze this while you show restraint and gather all information to discuss with appropriate parties prior to taking it to the press.  

About Moody Insurance Worldwide

Moody Insurance Worldwide, a division of Moody & Associates that was founded in 1914, is a leading provider of risk management programs and insurance coverage to individuals and businesses across the East Coast. We write all sizes of businesses, with technical expertise in many key industry areas, and provide personal insurance programs for estates and high net worth individuals. Our licensed, experienced commercial account managers can work with you to determine the coverage that you need at a competitive rate. Contact us today at (855) 868-0170 to learn more about what we can do for you.