As a reporter, I’m naturally interested in Fox News’ recent legal troubles. But corporate directors might also want to pay attention.
Here’s a refresher: Dominion Voting Systems charged that Fox News anchors defamed the company when they repeatedly aired lies about Dominion’s voting machines, blaming the technology for Donald Trump’s defeat in 2020. Through sworn testimonies with Fox executives, it became clear that the news empire’s top brass did not believe the machines were rigged to steer the election. Rather than go to trial, Fox paid Dominion a stunning $787 million.
But it isn’t only Fox News that might be held liable for spreading falsehoods. A Fox Corporation shareholder filed a lawsuit against four board members, including Rupert Murdoch and his son Lachlan, alleging the directors failed to provide proper oversight when they didn’t stop anchors from uttering the bizarre accusations.
Normally, such lawsuits are a long shot, and many do not survive motions to dismiss. But the Dominion outcome may bolster this case and any looming challenges against Fox board members. After all, Murdoch himself later wished he’d put a stop to the conspiracy theories. That Fox’s calculations at the time appeared to be part of its business strategy, not just a failure of oversight, may open up new legal questions about such “Caremark” cases writ large.
That last point could become a discussion that boards should follow. In the meantime, directors might be watching events like the Fox News case or SVB’s collapse, and the rise of ESG claims, and thinking about how well protected they are from legal woes. Even if you're not planning to spread crackpot theories designed to undermine U.S. democracy, you may want to revisit the terms of your Directors & Officers (D&O) insurance.
Peter Gleason, CEO of the National Association of Corporate Directors, says the success rate of shareholder lawsuits has remained “remarkably stable” over time, while the underlying issues have changed. Looking ahead, he says, board members could face legal challenges for failing to disclose or provide adequate oversight of matters like climate responsibility, cybersecurity, and human capital.
Public company board members are obligated to have D&O insurance. Private company board members, however, may want to rethink joining a board if D&O isn’t offered, says Gleason. “Insist on D&O insurance. The more, the better.”
Finding the right policy for your company takes research, but Gleason shares some broad tips:
- Find a broker who knows all the D&O insurers and relevant trends. “In choosing an insurer, select one that can do specialized underwriting so that it focuses on your risks,” Gleason says.
- If you have a claims-based policy, give timely notice of a lawsuit or potential lawsuit, and consider purchasing a "tail" to extend the time of notice.
- Read and understand your policy, and see if any exclusions leave you vulnerable. If they do, “push back.”
Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan
