The Post's editorial "Gov. Schaefer's Card for '88" {Dec. 16} stated, without elaboration, that among the proposals before the Maryland General Assembly in 1988 that "won't or shouldn't go over all that well" is "a revival of a plan rejected last year to limit the liability of corporate directors and extend the protection to company officers."

The proposal that was rejected in the House of Delegates earlier this year, after passage in the Maryland Senate, was a "self-executing" bill that would have automatically increased, without stockholder participation, the standard of liability for recovery of money damages against a director of a Maryland corporation to willful misconduct or deliberate recklessness. The new proposal is merely an "enabling" bill that permits stockholders to decide for themselves whether (and, if so, to what extent) to limit the liability of the directors of their corporations. Because it seemed inconsistent to permit the stockholders to limit the liability of directors but not officers, the drafters of the proposed bill included officers as well. This is exactly the same approach that has already been adopted in Virginia.

In the past two years, 35 states have enacted some form of legislation designed to limit the monetary liability of corporate directors and, in some cases, officers. Delaware and 24 other states have followed the "enabling" approach of the new Maryland proposal. Stockholders of literally hundreds of major corporations have approved liability limitation proposals, generally by wide margins. Among these corporations are some of the largest in the United States, with many individual as well as institutional stockholders.

In short, the Maryland proposal is in the mainstream of state legislation on this subject, and Maryland is already late in adopting it.


Chairman, Director and Officer

Liability Subcommittee, Maryland State Bar Association