Director Liability Committee and the Audit

A recent survey of 1,321 corporations conducted by the Wyatt Company (an actuarial consulting firm) found that the average total cost for a directors' and officers' liability claim is $556,500 ($385,000 award plus $181,500 in defense costs).

See Weaver P. , “Liabilities of Officers and Directors of Corporations,” CPCU Annals (June 1974), pp. 78–88; and Knepper W. E. , Liability of Corporate Officers and Directors (1973).

Falk Ernest Professor claims that Bar Chris is a precedent because of the large number and variety of liable defendants. See Virginia Law Review 1, 5 (1969).

Escott vs. Bar Chris Construction, 283 F. Supp.643(S.D.N.Y., 1968).

Knepper W. E. , “Some Observations on the Personal Liability of Professionals, Insurance Agents, and Corporate Directors and Officers for Misconduct and Malpractice,” in Greene Mark. R. Swadener Paul (eds.), Insurance Insights (Cincinnati: Southwestern Publishing Company, 1974), p. 254.

New York Stock Exchange, Report of Subcommittee on Independent Audits and Audit Procedures (23 August 1939).

U.S. Securities and Exchange Commission, In the Matter of McKesson-Robbins, Inc.—Summary of Findings and Conclusions, Accounting Series Release 1-112 (Washington, D.C.: U.S. Government Printing Office, 1968), p. 20.

“American Institute of Certified Public Accountants Executive Committee Statement,” Journal of Accountancy (September 1967).

“Standing Audit Committees Composed of Outside Directors: SEC,” Accounting Series Release 123 (23 March 1972).

Cook G. Bradford , “The Directors' Dilemma,” speech by the then Chairman of the Securities and Exchange Commission, April 6, 1973, in Dallas, Texas.

See “Audit Committees: Status and Prospects,” Journal of Accountancy (May 1969); Solomon Morton B. , “The Corporate Audit Committee: Its Growing Significance in the Corporate Structure,” The CPA Journal (May 1972), pp. 578–80; The Audit Committee and the Board of Directors (Arthur Andersen and Company, 1972); Auerbach Norman E. , “Audit Committees—New Corporate Institutions,” Financial Executive (September 1973), pp. 96–104; The Audit Committee (Price Water-house and Company, 1973); “Audit Committees—A Lawyer's View,” Business Lawyer (June 1973); “Effective Corporate Audit Committees,” Internal Auditor (July-August 1973); and Klock David Bellas Carl , “Audit Committees,” CPCU Annals (September 1974), pp. 208–13.

Mautz R. K. Neumann F. L. , Corporate Audit Committees (Urbana: Bureau of Economics and Business Research, University of Illinois, 1970). A summary of this report is found in Mautz R. K. Neumann F. L. , “The Effective Corporate Audit Committee,” Harvard Business Review (November-December 1970), pp. 57–65.

Corporate Directorship Practices: Membership and Committees of the Board (New York: The Conference Board, 1973).

Audit Committee Guide (New York: Coopers and Lybrand, 1974).

Mautz Neumann , op. cit., p. 62.

Auerbach , op. cit., p. 104.

Mace Myles , “The President and the Board of Directors,” Harvard Business Review (March-April 1972), p. 42.

See Assael Henry , “Constructive Role of Inter-Organizational Conflict,” Administrative Science Quarterly (December 1969); Coser Lewis , The Functions of Social Conflict (Glencoe, Ill.: The Free Press, 1956); and Deutsch M. , “Productive and Destructive Conflict,” Journal of Social Issues (January 1969), pp. 7–42.

See Mace Myles , Directors: Myth and Reality (Boston: Division of Research, Harvard Business School, 1971).

Mautz Neumann , op. cit.

Letter to the authors dated December 21, 1973.

For a detailed review of the complexities of insurance accounting see Audits of Stock Life Insurers (New York: American Institute of Certified Public Accountants, 1972); and Schachardt Robert A. , Managerial Accounting in the Property and Casualty Insurance Business (Cincinnati: The National Underwriter Company, 1969).

See “Profile of a Board of Director,” Best's Review (October 1971), p. 32.

Loomis C. J. , “ITT Disaster in Hartford,” Fortune (May 1975), p. 201.

Corporate Directorship Practices: Membership and Committees of the Board, op. cit., p. 63.

Wilde F. B. Vancil F. R. , “Performance Audits by Outside Directors,” Harvard Business Review (July-August 1972), pp. 112–16.

Bauer R. Fenn D. , “What Is a Corporate Social Audit?” Harvard Business Review (January-February 1973), pp. 37–48.

German Alliance Insurance Company vs. Lewis, 233 U.S. 380 (1914).

Mace , op. cit.

Report to agents (dated January 1972) from Fire St. Paul Casualty , a leader writer of directors' and officers' liability insurance in the United States.