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WorldCom, Enron Settlements Could Yield Tougher Directors

Sabatini Joanna | January 25, 2005

Company board members have escaped the punishment meted out to executives and sometimes their lawyers and accountants for corporate fraud.

Until now.

Earlier this month former directors at WorldCom and Enron agreed to pay millions to settle shareholder lawsuits. Though the cases themselves are separate and the circumstances differ, both settlements mark a watershed event for securities class action litigation. That's because, according to lawyers and governance experts, the settlements hold the directors personally liable for management's deception, and they take money from the board members' own pockets.

The lead plaintiffs wanted the settlements to change how directors behave in the boardroom. Specifically, they argued that directors should be more aggressive in seeking information about the companies they serve, should ask management more questions, and...

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