US President Donald Trump has recently issued several executive orders governing federal policy that are diverging from regulations in other jurisdictions in the Western world. This is creating a more challenging environment for multinational companies to navigate, raising the risk of companies failing to comply and thereby increasing the likelihood of directors' and officers' liability (D&O) related claims. The US government’s initiatives focus on corporate policies related to diversity, equity, and inclusion (DEI), but anti-bribery and environmental, social and governance (ESG) policies may also be impacted.
Trump’s approach to DEI
Within the first two days of his second term, President Trump issued two orders relating to DEI policies: Ending Radical and Wasteful Government DEI Programmes and Preferencing and Ending Illegal Discrimination and Restoring Merit-Based Opportunity. The orders direct federal officials and agencies to take steps to “end illegal discrimination and preferences”. Specifically, Trump administration officials and agencies are looking to:
• Terminate all DEI and Diversity, Equity, Inclusion, and Accessibility (DEIA) programmes’ policies, preferences, and activities.
• Dissolve federal offices related to DEI and DEIA.
• Eliminate affirmative action plan obligations regarding race and gender for federal contractors and halt enforcement activity by the Department of Labour’s Office of Federal Contract Compliance Programmes regarding race or gender affirmative action plans.
• Review practices of private employers and file a report with the president identifying “key sectors of concern” and “egregious and discriminatory practitioners”.
• Maintain the policy of the United States “to protect the civil rights of all Americans and to promote individual initiative, excellence, and hard work” and to enforce existing civil rights laws.
Rather than focusing only on the public sector, the executive orders also direct officials and agencies to submit plans outlining steps to deter DEI and DEIA “programmes or principles that constitute illegal discrimination or preferences” in the private sector. This includes identifying potential civil compliance investigations of publicly traded companies, large non-profit organisations and large higher education institutions, as well as potential litigation, regulatory guidance, and “other strategies to encourage the private sector to end illegal DEI discrimination.”
Risk mitigation
Companies operating in the US should review any DEI governance programmes and consider amendments to better suit the federal government requirements. For global companies, having a separate policy for US operations may be necessary since the European Union (EU) requires comprehensive DEI reporting from companies, mandating that companies with more than 100 employees report key DEI metrics, including: workforce diversity data (gender, ethnicity, disability status) employee engagement levels across different demographic groups. D&O underwriters may seek to understand how companies are managing those diverging regulatory approaches in different jurisdictions. Underwriters may ask an insured:
• Are you a federal contractor or grant recipient?
• Do you have an affirmative action programme in place and/or hiring goals related to specific groups?
• Have you evaluated your DEI policies and procedures since the executive orders were issued?
Employers should consider engaging counsel to review their DEI, DEIA, and similar programmes, policies and practices. Employers and their counsel should carefully consider the intent of their DEI, DEIA, and similar programmes, policies, and practices to confirm alignment with their organisational objectives and identify potential risk areas in preparation for future scrutiny and claims.
Businesses may want to include programmes based on race and/or gender in their review. This includes any forms of affirmative action, and any policies related to promotions, scholarships, grants and other benefits and awards that are limited to specific demographic groups. We do recommend seeking external advice in all the regions you operate in to make sure your policies are compliant.
Trump’s approach to bribery
On 10 February, President Trump issued another executive order, Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security, requiring the US Department of Justice (DoJ) to pause criminal enforcement of the Foreign Corrupt Practices Act (FCPA) for a period of 180 days (which can be extended). The FCPA prohibits US individuals and corporations from offering anything of value to foreign officials to gain a business advantage. The FCPA is of international significance given it applies equally to foreign firms or individuals that issue securities in the US or cause corrupt payments to occur in the US. The FCPA has been used in the past to investigate the sales practices of global companies and impose significant fines.
President Trump's “approach reflects a protectionist stance on anti-bribery measures,” according to law firm Taylor Wessing (opens a new window), “and non-US companies operating internationally should heed the warning that future FCPA enforcement efforts are likely to have a sharpened focus on them.” However, Taylor Wessing notes that this “does not mean US companies are off the hook – if they start engaging in practices which constitute bribery and corruption, they are at risk of falling afoul of other international law enforcement agencies for breaches of international anti-bribery laws.”
The UK Bribery Act 2010, for example, has extensive extra-territorial reach and severe sanctions in the event of breach. The Act covers offences committed anywhere in the world by individuals with a "close connection" to the UK, as well as offences committed at least partially in the UK by foreign companies or nationals.
Significantly, the Act criminalises a commercial organisation's failure to prevent bribery, and "associated persons" include individuals or entities such as employees, agents, or subsidiaries who perform services for or on behalf of the organisation. This applies regardless of whether the associated person has any direct connection to the UK or where the bribery offence occurs, provided that the organisation is formed in, or is carrying on a business or part of a business in the UK. By extension, it may therefore apply to US subsidiaries of other companies. It also applies to both public and private sector transactions.
The UK is even expanding corporate criminal liability with extra-territorial effect: a new "failure to prevent fraud" offence goes live on 1 September 2025. It will mean that large organisations will be criminally liable for corporate failure to prevent fraud unless they can show they have reasonable prevention procedures in place.
Risk mitigation
A pause on FCPA enforcement does not affect directors’ oversight responsibilities, which include implementing board-level reporting mechanisms and compliance controls to understand and document significant risks to the business.
Companies should review their compliance programmes and internal controls to ensure they remain robust and effective, even during the enforcement pause. Strong compliance programmes remain important to avoid or minimise the risks of investigations that may not materialise until years later. Beyond future US and current international regulatory accountability, companies still have obligations to shareholders and can face liability for not effectively monitoring and adjusting to external risks.
It is crucial to remain vigilant and prepared for the new enforcement guidelines that will follow and the undiminished risk of enforcement by international regulators and future US regulators.
Trump’s approach to the environment
The US Securities and Exchange Commission (SEC) will likely seek to rescind or substantially revise climate rules it adopted in 2024 that standardised climate-related disclosures by public companies and public offerings. Businesses should monitor this space carefully for any changes but also pay attention to developments on the other side of the pond, where changes may also be forthcoming.
In February 2025, the European Commission announced a series of proposals to reduce sustainability reporting requirements for companies, including plans to remove around 80% of companies from the scope of the Corporate Sustainability Reporting Directive (CSRD), focusing the sustainability reporting obligations on the largest companies. In addition, the plan aims to ensure that sustainability reporting requirements on large companies do not burden smaller companies in their value chains.
At the same time, the UK equivalent, the Task Force on Climate-Related Financial Disclosures (TCFD) regulation, compels companies with more than 500 employees to include climate-related financial information as part of their financial disclosures.
Risk mitigation
Despite persisting anti-environmental sentiment, insurers are more likely to consider companies with robust environmental programmes as lower-risk entities and, as a result, offer them favourable coverage terms and reduced premiums. Engaging with your main stakeholders is crucial to understand their priorities and address any potential conflicts early.
Recommendations
Directors’ and officers’ liability (D&O) insurance can protect organisations, board members, and other senior leaders from claims brought by shareholders, investors and regulators regarding management decisions. D&O insurance can reimburse insureds for legal defence costs, litigation awards and settlements, and, in some instances, regulatory actions, investigations, and related costs.
If you have operations in the US, you should prepare for additional underwriting scrutiny. For example, underwriters may ask:
• Have you evaluated your DEI/ ESG/ bribery and corruption policies and procedures since the executive orders were issued?
• Are changes required, and how have these been communicated to the relevant stakeholders?
• How are you managing the divergence in regulations at a group level?
For further information, please visit the Lockton Management & Liability page (opens a new window), or contact a member of our team.
