By Vision Reporter
Much as all employees have roles to play in the running of companies and other organisations, it’s prudent to note that directors play more pivotal roles in taking and influencing decisions that guide company operations.
However, in the process of executing duties, it’s not out of the ordinary for directors and officers to plunge themselves into losses for which they are personally liable and must incur expenses to offset the losses.
Directors and officers may not all through avoid flaws like mismanagement of the company’s operations or assets, non-compliance with tax laws, misrepresentation during a sale or purchase of company’s assets, conflicts of interest, deceptive trade practices creditor claim/loan default, conspiracy and negligence among others.
Any third party affected by the decisions of the directors and officers of the company can sue including regulators, shareholders, investors, competitors, employees, business partners, customers, creditors, suppliers, and the company itself and the defendant could be forced to pay the various damages.
It’s against the background of such occurrences that AIG decided to innovate into the Directors and Officers (D&O) policy to cushion them against claims which may arise from decisions and actions taken within the scope of their official capacities.
According to the company’s Africa Manager Financial Lines Phillip Hobson, the policy covers the personal liability of directors and officers and also reimburses the company in the event that it pays the claim on behalf of the directors or officers in order to protect them.
“The policy primarily pays for defense costs and financial losses in the event of a claim, it also broadens to cover costs incurred in the course of investigations by regulators and public relations consultancy costs to protect the company’s and its management’s reputation in case of a crisis,” he said while introducing the product to directors and insurance brokers during a breakfast meeting at Sheraton Hotel.
Speaking to the media on the sidelines of the meeting, the Capital Markets Authority Chief Executive officer Japheth Kato was optimistic that the policy plays a critical part in strengthening corporate governance systems by offsetting losses that could constrain companies’ and individuals’ progress should such losses go uncompensated.
The AIG Uganda Managing Director Anna Othieno said that the product is not only for big corporations and organisations but also Small and Medium Enterprises given their little risk management infrastructure, meaning that any big losses can be hard to deal with and the entity remains afloat.