A Neglected Policy Option: Indemnification of Directors for Amounts Paid to Settle Derivative Suits - Looking Past "Circularity" to Context and Reform

This Article explores and analyzes the rationale both for and against allowing corporations to indemnify directors for amounts directors pay to settle derivative litigation. The author presents the case for permitting boards to settle cases by allowing a director to acknowledge liability, pay a sum of money to the corporation and receive its prompt return from the corporation. She argues that notwithstanding risks, indemnification of directors in derivative suits is not patently worse that current termination options. It yields more cheaply the same corporate recovery as a court dismissal.