Published September 2nd, 2022, by Kyle Langan
Starbucks Corp executives and directors have been sued over the entity’s efforts to promote diversity. The plaintiff, a Starbucks shareholder, alleges that these efforts insinuate racial discrimination because corporate policies require the company to make race-based decisions that benefit minorities and violate federal and state civil rights laws. 
“In a complaint filed on Tuesday, the National Center for Public Policy Research objected to Starbucks’ setting hiring goals for Blacks and other people of color, awarding contracts to ‘diverse’ suppliers and advertisers, and tying executive pay to diversity.” 
“Thirty-five current and former Starbucks executives and directors, including interim Chief Executive Howard Schultz, are among the defendants.”  The plaintiff claims that although these efforts appear diverse, equitable and inclusive, they actually harm the company and its owners. 
The only policy that would likely cover the exposure in this situation is directors’ and officers’ liability, also known as D&O. Does your current risk management strategy include management liability protection? The more common General Liability policies do not pay for financial losses of a company, but management liability insurance can. Management liability policies include three main types: D&O, Employment Practices Liability (EPL), and Fiduciary Liability.
The oft-misunderstood coverage that will defend and finance this type of loss is D&O. It is an available safety net that your company can rely upon if you have it in your portfolio of protection, but sadly many companies may have overlooked, or never considered D&O.
Like the name implies, D&O indemnifies and defends for claims made against the entity, and those that serve on the board, as well as the company’s officers.  This policy type covers managerial decisions, or indecisions, that allegedly result in adverse consequences for both large and small companies alike.  This line of management liability protection is available to all company types: for profit, non-profit, private companies, and those publicly traded.
D&O should not be viewed as a company expense, but rather as an asset. An effective risk manager will break down the cost structure of this protection and implement a plan to prevent economic losses of this nature. Lastly, entity coverage covers claims that are made directly against the organization, as well as those individuals on the board and that hold a corporate office within it.
At least the officers and directors named in the above suit will be properly indemnified by their D&O policy; the big question is what if this suit landed on your desk come Tuesday morning? Are you properly protected?
[1-4] Person, & Stempel, J. (2022, September 1). Starbucks executives, directors are sued over Diversity Policies. Reuters. Retrieved September 2, 2022, from https://www.reuters.com/business/retail-consumer/starbucks-executives-directors-are-sued-over-diversity-policies-2022-08-31/
[5-6] IRMI – Directors and officers liability insurance. Directors and Officers (D&O) Liability Insurance | Insurance Glossary Definition | IRMI.com. (n.d.). Retrieved September 28, 2021, from https://www.irmi.com/term/insurance-definitions/directors-and-officers-liability-insurance.