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In recent years corporate directors and officers, and their lawyers, have become aware that the Damocles' sword of personal liability is as much a part of the furniture of the executive suite as the Bigelow on the floor. Some of the awareness has been stimulated by the imaginative advertising of insurance brokers pushing directors' and officers' liability insurance; some has come from painful personal experience; but the main source has been the proliferation of lawsuits seeking (frequently with success) to impose such liability. Much of this litigation has been based on such traditional grounds as breach of duty to the corporation, but fertile legal imaginations have conceived novel and alarming theories of liability. Despite the procedural obstacles which courts and legislatures have interposed, the stockholder's derivative suit is anything but a vanishing species of litigation, especially in the federal courts. Federal courts have, for example, been disinclined to require the plaintiff to seek the approval of other stockholders before suing and have hesitated to treat ratification of the management's conduct by a majority of stockholders as a bar to suit.' They have refused to apply state security-for-expenses statutes when the plaintiff manages to state a federal cause of action.2 Not even the requirement of Rule 23.1 of the Federal Rules of Civil Procedure that the plaintiff must have owned his stock at the time of the transaction complained of has been applied to suits brought under section 16(b) of the Securities Exchange Act of 1934 (1934 Act)3 to recover shortswing profits.4 The general attitude of the federal courts to stockholders' suits is perhaps epito-

New Problems in Indemnifying and Insuring Directors: Protection against Liability under the Federal Securities Laws