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European and Asian companies believe that a US-stylecompensation culture is already well established, and there is areal danger that boards in these regions lack the experience ofdealing with such a litigious environment," warned the report."Organisations operating there may need to spend substantial timeand resources improving their infrastructure, skills and capabilityto respond to this trend."
The research, conducted among 183 board level executives acrossthe world, found that half of directors feel more exposed to directlitigation against them than they did three years ago.
The survey investigated to what degree companies are being heldmore responsible for their activities and to what extent thatliability stretches to individual directors.
It found that liability and the legal activity surrounding it isincreasingly a part of directors' lives, and that 13% of a board'stime is now spent discussing litigation, a proportion which theexecutives expect to rise.
"There is strong agreement that valuable resources are beingspent on legal issues that could be deployed elsewhere," said thereport. "With 58% of respondents using lawyers more frequently and47% reporting a rise in the cost of directors’ and officers’insurance, one third of companies are passing the cost on tocustomers through higher prices, and even more expect to do so infuture."
"Most significantly of all, about one third of businesses havebecome more risk averse and less likely to invest in new businessopportunities as a direct result of concerns about litigation," itsaid.
"With the development of success fees and third party funding,litigation is becoming big business," said Tom Stocker, alitigation lawyer at Pinsent Masons, the law firm behindOUT-LAW.COM.
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"There is also a very real fear of personal liability forfailures to comply with the laws that regulate business in the UKand overseas. We are seeing an increasing trend of regulatorstaking enforcement action against directors and senior managers forregulatory breaches," said Stocker.
The report recommended that businesses spend less time dealingwith existing problems and more time dealing proactively withfuture risks.
"Boards already think that they spend too much time on liabilityand litigation issues, but this could be spent more wisely and evenreduced if they switched their focus to emerging risks rather thanconcentrating on issues which are already subject to legal andregulatory activity," it said.
The executives themselves identified the areas of likely futurerisk as being technology and security, environmental liability andcorporate governance.
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"After a decade of high-profile company failures and thesub-prime crisis currently in the news headlines, boards are notyet convinced that business has fully got to grips with issuesaround transparency and disclosure," it said.
Stocker said that companies should make concrete plans thatassess and provide for risks in their business. "Companies can helpprotect themselves from liability by putting in place riskmanagement procedures and policies, and ensuring that thearrangements for contracting are tight," he said.