Angela Jack, Executive Head of Specialty, Broking and Risk Solutions at Aon South Africa

In today’s competitive marketplace, companies face mounting pressure to attract and retain investors. This can tempt leaders to overstate achievements, inflate projections, or engage in window dressing. While these tactics may help polish a company’s image, they risk crossing the line into misrepresentation—or even securities fraud—creating serious legal and financial consequences for corporate leadership.

Against this backdrop, Directors and Officers (D&O) Liability Insurance has become a critical safeguard.

Angela Jack, Executive Head of Specialty, Broking and Risk Solutions at Aon South Africa, explains that, “D&O insurance is designed to protect directors and officers from personal financial loss if they are sued for alleged wrongful acts in managing the company. This includes defence costs, settlements and judgments stemming from lawsuits brought by investors, regulators or other stakeholders. However, coverage does not extend to intentional acts of fraud or criminal behaviour.”

The Rise of Corporate ‘Washing’

Corporate leaders are under increasing scrutiny—not only for financial performance but also for how they present values, strategies and commitments. This has given rise to a spectrum of ‘washing’ practices, where companies risk misleading investors, regulators and the public. These practices can escalate into securities litigation, placing directors and officers under the spotlight.

Some of the most common forms include:

• Greenwashing – Exaggerating or falsifying a company’s sustainability efforts or environmental responsibility. This can mislead investors who rely on Environmental, Social and Governance (ESG) claims. If such claims prove false, securities lawsuits may follow. D&O insurance may respond unless fraud is established, but ESG misrepresentation is fast becoming a major litigation trigger.

• Whitewashing – Concealing or downplaying internal misconduct or material risks, often through biased internal investigations or selective disclosure. Investors may bring lawsuits for failure to disclose wrongdoing. Where concealment is proven to be deliberate, D&O coverage is likely to be denied.

• Earnings Washing – Manipulating or misrepresenting financial results to inflate performance or hide losses. This is one of the classic bases for securities fraud litigation. D&O insurance may respond, but cover is excluded if fraud or criminal conduct is established.

• Pinkwashing – Publicly championing LGBTQ+ rights or values to distract from negative actions, discriminatory practices or reputational issues. If claims are misleading or mask misconduct, investors and stakeholders may pursue lawsuits. D&O may provide defence cover, but deliberate misrepresentation could void protection.

• Sportswashing – Using sports sponsorships, partnerships or events to improve the organisation’s reputation or divert attention from controversies such as corruption or human rights concerns. Litigation risk arises if investors allege resources were misused or disclosures around sponsorship strategy were misleading. While D&O cover could respond, intent to mislead would undermine coverage.

• AI Washing – Exaggerating or misrepresenting the company’s use, leadership or capability in artificial intelligence to attract investment or publicity. If promised results fail to materialise, investors may claim they were misled. D&O coverage may be triggered, but as with other forms, proven fraud or deliberate misrepresentation could lead to denial.

“There is a very fine line between optimism and misrepresentation and for directors and officers, the challenge lies in balancing a compelling narrative for investors with transparent, accurate and complete disclosures. As regulatory scrutiny intensifies and stakeholder expectations rise, the risks linked to ‘washing’ will only grow,” says Angela.

“Robust D&O insurance is therefore a vital part of corporate risk management, but it is no substitute for ethical leadership and sound governance. Upholding these principles is essential to protecting investor trust and avoiding the costly consequences of crossing the line. This is where the insight and guidance from a seasoned risk and insurance broker can help corporates make better decisions when it comes to toeing the line between optimism and misrepresentation,” Angela concludes.

ENDS