Trick or Treat: Are Observer Directors Really Directors in Disguise?

An increased number of corporations appear to be now considering or implementing the practice of utilizing “observer” or “advisory” directors who are not formally elected as directors but who participate at board meetings as non-voting attendees.  A corporation’s apparent goal in adopting this practice is to insulate the “observer” from the liability exposures of being a director while still benefiting from that person’s insights and expertise.  Although not uncommon in some countries, this practice historically has not been popular in the United States.

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