Bibliographic record
Abstract
Outside directors can do a bad job, sometimes spectacularly.Yet outside directors of U.S. public companies who fail to meet what we call their "vigilance duties" under corporate, securities, environmental, pension, and other laws almost never face actual out-of-pocket liability for good faith conduct.Their nominal liability is almost entirely eliminated by a combination of indemnification, insurance, procedural rules, and the settlement incentives of plaintiffs, defendants, and insurers.The principal risk of actual liability is under securities law, for an insolvent company (which can neither pay damages itself nor indemnify the director) with one or more seriously rich (hence worth chasing) directors, where damages exceed the D&O insurance policy limits and the director does not represent an institution that can indemnify him.The principal sanction against outside directors is harm to reputation, not direct financial loss.In a companion paper, Bernard Black & Brian Cheffins, Outside Director Liability Across Countries (2003), we study six comparison common-law and civil-law countries (Australia, Britain, Canada, France, Germany, and Japan).We find huge differences in legal rules and nominal liability.Securities and corporate law risk recedes, while nominal liability under other laws becomes central.Yet we find a similar pattern of a tiny but nonzero risk of actual liability.This suggests that a barely open window of actual liability is a stable solution, both politically and in the D&O insurance market.A barely open window may also be a sensible policy solution, given the multiple goals of incenting directors to be optimally (not maximally) diligent, wanting directors to be aware of potential liability for misconduct yet not overly risk averse, and wanting good candidates to become directors.The details of where the liability risk comes from may have only a small effect on director behavior.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.004 | 0.023 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.003 | 0.002 |
| Science and technology studies | 0.003 | 0.002 |
| Scholarly communication | 0.006 | 0.004 |
| Open science | 0.001 | 0.004 |
| Research integrity | 0.003 | 0.002 |
| Insufficient payload (model declined to judge) | 0.044 | 0.008 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".