Many states, including Delaware, have passed statutory protections which provide directors and officers with advancement and indemnifications rights. When a director or officer is sued, the corporation advances defense expenses (and generally seeks reimbursement for that advancement under Side-B of its directors and officers insurance policy). But the statutory protections for advancement and indemnity are not applicable to all individuals affiliated with the company – they generally apply only to directors and officers.
With "title creep" and "title inflation" prevalent in the financial services industry, that issue has become murkier over time. Is a vice-president an officer of the Company by virtue of his title? That question took center stage in a recent decision by the Third Circuit – Aleynikov v. Goldman Sachs Group – where a Goldman Sachs computer programmer sought advancement of defense expenses arising out of criminal allegations that he copied source code developed at Goldman Sachs and transferred them to an outside server.
The question of whether a vice-president qualifies as an "officer" had dramatic implications for the corporation. If the vice-president was considered an "officer" of the company, he would be entitled to advancement of over $2 million in defense expenses. However, if the vice-president was not considered an officer, he would be forced to bear those expenses on his own.
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