Board positions used to be seen as a crowning achievement of a career. Today, they carry far more weight. Directors are expected to make tough decisions, defend shareholder interests, and be accountable when things go wrong. The prestige remains, but the risks are more visible than ever.
Companies often underestimate how carefully directors evaluate risk before accepting a position. Reputation damage, legal fees, and even personal financial loss are real concerns. This is why strong Director and Officers (D&O) insurance coverage signals that a business takes risks seriously.
Today, let’s find out why it’s one of the best ways to ensure your board has the best minds.
Board Seats Are No Longer Easy to Fill
Not too long ago, board seats used to be coveted by the ambitious. It gave you a voice that could help steer the direction of a company. However, today, finding good talent to fill your board can be hard.
Data from surveys involving 520 managers from American public companies found that 93% of executives wanted at least one director to be replaced. Likewise, 78% wanted two or more gone.
This should give you some perspective on how directors are often judged and how unstable the role can feel. Anyone considering joining a board knows this level of scrutiny and unpredictability means they need to be selective about where they apply.
Another factor is experience. A Spencer Stuart Board of Index report noted that 34% of S&P 500 directors were serving on boards for the first time. However, only 28% of boards used an independent third party to help with performance evaluation.
This lack of quality control and unpredictability in some companies can create hesitation among candidates. No one wants to join a board and have to coordinate with inexperienced and unvetted peers.
Rising Legal and Financial Risks Make D&O Coverage More Valuable Than Ever
Legal disputes are the last thing any board wants to face, but the times are changing. Deloitte notes that there’s a rising trend of plaintiffs seeking vast sums of money for injuries that lead to large insurance claims. Thus, otherwise underpriced insurance segments like D&O liability might see a rise in the future.
Directors are acutely aware of this shift. The prospect of facing lawsuits tied to company actions, even when they have acted responsibly, is enough to make many hesitate before joining. What might once have been seen as a manageable risk now feels far less predictable.
This is why Okawood Risk Insurance Solutions explains that D&O insurance is needed to protect leadership from personal liability. If you want serious talent in the boardroom, you must show that you have protections in place. Offering strong D&O coverage demonstrates that leadership is not left to fend for itself.
Thus, it’s critical to learn more about how liability affects the selection process of a board member. In an era when litigation risk only continues to climb, D&O coverage is very much a cornerstone of board recruitment.
The Real Cost of D&O vs. the Cost of Missed Talent
According to Business.com, prices for D&O insurance depend on factors like your assets, debt, revenue, and industry. You should expect to pay around $5,000 per year for every $1 million in coverage. Smaller businesses tend to pay an average of $1,680 a month.
While those sums may sound steep, they are small compared to the cost of missing out on the right directors. Experienced board members bring strategic insights, market credibility, and access to networks that can drive growth. Losing the chance to recruit them because you did not provide adequate protection is far more expensive in the long run.
Instead of viewing D&O insurance as a routine policy, it should be considered part of the value package offered to directors. Just as salary and stock options reflect how a company values executive leadership, D&O coverage signals how it values the safety and confidence of its board. So, companies that communicate this clearly to candidates will find themselves ahead in attracting the caliber of directors who efficiently carry out key board functions.
Frequently Asked Questions
1. What is D&O insurance?
Directors and Officers (D&O) insurance protects company leaders from personal financial losses if they’re sued for decisions made on the job. It usually covers legal fees, settlements, or damages, giving executives peace of mind to make tough calls without constant fear.
2. Is D&O insurance mandatory?
In the U.S., D&O insurance isn’t legally required, but most growing businesses carry it anyway. Investors and board members often expect it before joining, since lawsuits can happen even in well-run companies. Think of it less as a formality and more as protection.
3. How to find good board members?
Look for people who balance expertise with commitment. A strong network helps, but don’t just chase big names. Instead, seek individuals who align with your vision, can challenge assumptions constructively, and bring fresh industry insight. Personal referrals and professional groups are great starting points.
Attracting high-performing directors is harder today than at any point in the past. Increased scrutiny, rising litigation costs, and the risks of personal liability all weigh heavily on candidates. Yet these challenges also create an opportunity for businesses that move proactively.
This is why D&O insurance is becoming one of the most persuasive tools in board recruitment. It doesn’t just protect the company from financial loss; it also reassures individuals who are asked to guide its future.