D and O (D&O) is an initialism used in corporate governance that stands for directors and officers. These company individuals observe a managerial role and oversee the functioning of the company. Directors and officers participate on the board at all board-led corporations and educational institutions.
- Definition of directors
A director of an organisation is an individual appointed by the shareholders to serve on the board. Different types of directors handle different aspects of the company’s operations.
- Role of directors
The board oversees the company’s management and leads its strategic direction. Directors’ responsibilities include creating strategic plans, overseeing finances, making business decisions, implementing policies, ensuring compliance and assessing senior leadership.
- Definition of officers
An officer is a key management executive of a company appointed by the board of directors to handle its day-to-day operations.
- Role of officers
Officers on the board typically include the board secretary, chairman, vice chair and president. Their role depends on the position they hold. Generally, officers carry out daily operations outlined in the company bye-laws and those assigned to them by the board.
Relationship between directors and officers
Officers are appointed by directors to manage the company’s daily operations. They sit on the board and execute the tasks assigned to them by the directors. The board finalises important corporate policies and decisions and assigns the right officers to carry them out.
What is D and O liability insurance?
D and O liability insurance, or D&O insurance, is a type of insurance policy for the board that protects the personal assets of directors and officers. The policy offers reimbursement for any financial losses, legal fees and settlement costs in case an employee, customer or anyone else sues an officer or director for alleged wrongful acts committed during their tenure. These can include the following:
- Causing bankruptcy or significant financial loss
- Discriminating against an employee
- Failing to comply with workplace policies
- Intellectual property theft
- Copyright infringement
- Mishandling funds
Companies must have D and O insurance in place if they wish to attract competent directors and officers to serve on the board without fear of risking their assets.
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