The new law and the threat of litigation it brings probably have something to do with the out-of-control cost of directors' and officers' liability insurance.
Torn between loyalty to Greenberg, who had handpicked his directors, and fear of personal liability in a shareholder or criminal suit, board members discussed bringing in a new chief executive to take the heat off the company.
Each operating company that was a corporation had a board of directors and each company that was a limited liability company had a board of managers.
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The offer was a 20% premium to the market price and the highest bid but by spending only a week considering it, and apparently deferring too much to Lyondell's chief executive, the court said directors might have opened themselves up to personal liability.
The Sarbanes-Oxley Act of 2002 increased the role directors play in weeding out fraud and their potential liability for overlooking it.
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Corporate directors and executives can be sued and even face criminal liability if the company fails to properly disclose business risks--including, many now worry, the cost of emissions.
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Directors will be less happy to sanction a takeover or restructuring knowing that they could suffer personal liability for honest business decisions.
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