There is perhaps one single obligation that most aggravates corporate boards of directors: Paying your opponent’s legal fees when you are convinced he has done you wrong. How then is that not just possible, but a regular occurrence?

Delaware law permits a corporation to agree to pay an officer or director’s litigation expenses “in advance of the final disposition of such action, suit or proceedings.” Persons considering serving on the boards of directors of a publicly traded corporation almost always insist that such “advancement rights” be provided to them, by contract or corporate bylaw. Thus, if their corporation later claims that the director acted improperly, such as by obtaining an unauthorized benefit or by deliberately neglecting her duties, that director will ask the corporation to pay for her defense.

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