IRMI Update
Risk Management & Insurance
Commentary, Tips, and Tactics
July 8, 2009 | Issue 209 | ISSN: 1530-7948
In This Issue
Colleague,
It is the rare individual who has the education, skills, and personality
to lead a large corporation to long-term success. When their talents yield results,
they deserve to be compensated just as star athletes are. However, many high
level executives in publicly held corporations are over-compensated whether
or not their companies do well.
How should we put the brakes on runaway executive compensation? Arbitrary
caps will never work. Appointing a compensation czar to oversee compensation
at all public companies also won't fly.
In my view, the most important step is to increase the number of truly independent
directors on boards. They should develop systems that reward for long-term success
(measured over years rather than quarters). Some other ideas include:
- Bar exercise of options for a specific number of years or until the
stock price exceeds a specific benchmark.
- Charge the cost of option grants against corporate income when exercised.
- Award stock that must be held for a number of years, so the executives
win or lose right along with stockholders.
- Require shareholders—not simply the board of directors—to vote on stock
option grants.
- Require boards to retain an ability to withhold or curb golden parachute
payments.
What is your view? Are executives at publicly held companies overpaid? How
should a reasonable compensation system be structured that would motivate and
reward without a ludicrous payout for temporary short-term results or outright
failure? [See reader responses].
While on the subject of directors and officers, IRMI is proud to introduce
the new Management
Liability Insurance Specialist (MLIS) continuing education and certification
program. MLIS was designed with the goal of giving you the knowledge, confidence,
and credentials to assure that the D&O, EPL, and fiduciary liability policies
you sell or buy to properly protect directors, officers, managers, and companies.
Insurance CE credit is available in most states.
Many thanks for subscribing to IRMI Update.
All the best,
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
International Risk Management Institute, Inc.
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Risk Tip
Covered or Excluded? Make Sure To Check the Definitions!
Despite experience and education, it seems there is always something to learn
in the insurance business. Recently, while working with a prospective client,
I noticed an attached endorsement in a competitor's non-Insurance Services Office,
Inc. (ISO), general liability form that excluded loss of electronic data. This
exclusion was problematic and (I thought at the time) would be an area that
I could offer better coverage. After checking the exclusion section of the ISO
coverage form that we were proposing and finding no exclusion for loss of data,
and then confirming with our underwriter that the quote would not have the offending
exclusion attached, I was ready to proclaim a coverage advantage for our program.
Then I looked at the definitions section of the policy form and found that "property
damage" was defined as including "tangible property" only. The definition went
on further to specify that electronic data was NOT "tangible property." The
lesson here is that policy forms (in this case ISO versus manuscript) can be
different in their structure, and each must be examined closely—in all their
sections and subsections—before a coverage determination is made.
By: Joseph L. Pilato, CPCU, Account Executive
Maran Corporate
Risk Associates
Marlton, NJ
GET PUBLISHED IN IRMI
UPDATE: Send us a practical tip (less than 300 words) for identifying
and managing risks, buying insurance, managing claims, or filling gaps in insurance
coverages. We'll acknowledge your contribution as we did for Joseph.
Submit an IRMI Update risk
tip.
What's New in Your IRMI Library
Carefully Analyze D&O Coverage
With no standard D&O policy form widely adopted by the industry, there are
very significant variations from one insurer's policy to another's. Analyzing
the coverage provisions of a policy—or comparing the provisions of two policies—is
a daunting and tedious task. That's why we do it for you in
D&O MAPS. From ACE to Zurich, this reference
includes painstakingly prepared analyses of virtually every D&O form used in
the U.S. marketplace, and two to three new or updated analyses are included
every month (this month features analyses of ACE and Hartford policies). Far
more than a simple side-by-side display of policy provisions,
D&O MAPS illuminates good (blue) and restrictive
(red) features to quickly alert you to the positives and negatives of an insurer's
form. If you subscribe to D&O MAPS, take
a look at the D&O Policy Specimens and Analysis section in the platform to which
you subscribe and remember to refer to it the next time you buy or sell a D&O
policy.
For summaries of other new and updated information in your IRMI library,
go to What's New on IRMI Online or
What's New in SilverPlume Sage.
Recent Articles on IRMI.com
New Expert Commentary
There are over 1,100 risk management and insurance articles on IRMI.com.
Below you'll find summaries of some recent additions with links to the articles.
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