Friday, August 6, 2010

Still Paying for Lehman’s Demise - Opinionator Blog -

Still Paying for Lehman’s Demise - Opinionator Blog - "Oh come now, Cohan, ever hear of the corporate veil, or Indemnification Agreements or mandatory indemnification provisions of Certificates (or Articles) of Incorporation and By-Laws? How about D & O coverage? These former officers of Lehman were acting for and on behalf of Lehman, a juristic person incapable of acting without human intervention. Whatever Cohan might think, not a one of them intended to harm Lehman, just the opposite - they wanted to save it. Moreover, what person in his or her right mind takes on the risk of defending endless lawsuits without demanding protection from the institution on whose behalf he or she will be acting? Of course the Lehman estate (or the insurers) should make certain that these people are protected, even from their own mistakes, with the customary exceptions for fraud or self-dealing. The idea that still-innocent corporate servants should be stripped of the protections that are both standard and were probably bargained for is silly. Universalizability is a good test of ideas such as this: what would happen to our still-surviving capitalist system if every corporate officer and director in making every decision would first worry about his or her own potential for not just ultimate liability but for huge legal expenses? We would have exceedingly mediocre financial and business results, if not outright failures, as business risks were avoided like the plague."

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