The scenario is familiar: A company comes under investigation for a business practice or a particular deal, or it is sued for securities fraud or for wrongdoing involving a complicated transaction. The company’s personnel who are implicated look to the company for financial support and protection.

Most companies, at least where the employee acted in good faith and reasonably, typically want to give some measure of support to their employees in these circumstances. This would include both indemnification for actual liability, and payment of legal fees that the employee incurs in defending himself. State law typically provides a statutory regime for these matters, and most companies have provisions for indemnification and advancement in their bylaws. ...