The Consequences of Restatements for Outside Directors

Serving on a public company’s board of directors carries responsibilities and risks as well as benefits for directors.  If directors do not carry out their duties effectively, they risk damaging their reputation, losing their board seats, and facing shareholder lawsuits.  In a recent paper, “Consequences of Restatements for Outside Directors,” I review the academic literature to identify the consequences directors face if the company on whose board they serve must restate its financial reports.

A restatement is required when a firm, its auditor, or the SEC finds that a prior period financial statement is materially inaccurate, forcing the company to … Read more