Among the three pillars of ESG, governance is often unjustly overlooked. Yet governance is the invisible glue that holds together legal liability, strategic decisions, and operational execution—its importance becomes especially evident in challenging times.
Annika Vait, partner at the law firm RASK and sworn advocate, deals with board member liability issues on a daily basis. In this interview, she explains why the role of a board member is far more than just a title—it is one of the most responsible positions in a company. She also shares practical advice on how to better manage risks and avoid painful lessons.
Why is ESG often perceived as something “soft”?
ESG is frequently seen as a separate set of obligations that seem time-consuming and resource-intensive. When we look specifically at the "G" in ESG—governance—we are talking about decision-making processes, control mechanisms, and the division of responsibilities. These are not mere formalities, but principles for which leaders are accountable—strategically, reputationally, and legally.
What is your daily exposure to board member liability?
It’s one of the core aspects of my work and business advisory practice. On a daily basis, this involves working with contracts, advising on meeting preparations, and primarily supporting the fulfillment of due diligence obligations. For example, before major transactions, companies often commission a legal audit—not just a business decision, but also part of a board member’s duty of care. We also regularly deal with disputes and claims against board members—both pre-litigation and in court.
How can a board member protect themselves from risks?
The most important thing is to act diligently and loyally—and to be able to prove it. In practice, companies often overlook how to properly document decisions and their processes. Yet it’s simple: recording decisions and meeting minutes, preserving and organizing emails and documents. These steps can be crucial in later disputes and demonstrate that the board member acted with the care expected of a prudent businessperson.
Who can bring claims against a board member?
Most commonly, the company itself, often targeting former board members. But in certain cases, shareholders and creditors may also file claims. In recent years, we’ve seen a steady rise in such cases.
What lessons can be drawn from high-profile cases, like that of Eesti Energia and Hando Sutter, or the Supreme Court’s ruling on a local municipality leader?
These examples underscore two things. First, that board member liability is not a theoretical concept. Second, that anyone taking on such a role should carefully assess the company they are joining. Court practice confirms that breaches of duty can lead to personal liability. Lawyers have long been aware of this, but the broader public is only beginning to fully grasp it.
Have you noticed any shifts in awareness?
Yes, absolutely. Case law and publicized incidents have increased awareness that board member liability is very real. We’re seeing more companies request legal opinions and consider whether to pursue claims against board members.
How does general economic uncertainty affect executives and their liability?
During times of crisis and liquidity issues, leadership decisions face heightened scrutiny. This doesn’t mean risks can’t be taken—but they must be reasonable and well-managed. If a risk materializes in a way that couldn’t have been foreseen even with due care, liability doesn’t automatically follow. But if risks are ignored or poorly mitigated, accountability may come into play.
What does a board member’s duty of loyalty mean in practice?
It means not putting personal interests ahead of the company’s. Classic breaches include misappropriating assets or entering into self-serving transactions that harm the company—for example, selling assets cheaply to oneself or purchasing something for the company at an inflated price.
What advice would you give to a board member who wants to protect themselves consciously?
Before accepting the position, thoroughly understand your obligations—this includes laws, contracts, and internal documents. Involve legal counsel if needed. It might seem complex, but it’s an investment that can help prevent future risks and missteps.
What advice would you offer to shareholders?
Know your board candidate and do proper due diligence before making your choice. Afterward, make sure the interests of both the company and the shareholders are protected in writing—a well-drafted board member agreement is crucial.
What steps should be taken before agreeing to become a board member?
Evaluate the company’s situation, ownership structure, and key contractual partners. Understand your responsibilities and ensure your rights are protected—especially through a clear, well-structured board member agreement. If the board has multiple members, define internal roles and responsibilities and document them.
What developments will shape board member liability in the future?
Liability will become even more visible and widely recognized. This may make it harder to find people willing to take on such roles—not everyone is prepared to bear that level of responsibility. On the flip side, it encourages owners and leaders to think more deeply about expectations and how to formalize them. The best results come from clear agreements and transparency—something that benefits everyone involved.