19 FEBRUARY 1994, Page 23

Lawyers v. directors

A NEW hazard for chairmen and directors here is to be sued for retroactive fraud. This happens when they say something that puts the share price down. Shareholders then demand to be compensated, and as egged on by a firm of San Diego lawyers who have invented this kind of action and take a cut of the proceeds. Directors tend to claim on their insurance for personal lia- bility, and settle. As a result, the cost of insurance has gone through the roof and directors are in short supply. No shortage of lawyers, though. Considering what it has to put up with, the US economy is wonder- fully resilient, but the best news for Presi- dent Clinton is that the Japanese are train- ing and hiring more lawyers.