The agreement in principle, which must be approved by a bankruptcy judge, calls for the directors' liability insurance companies to pay $36 million and the directors to pay more than 20 percent of their combined net worth, or about $18 million, the Washington Post reported Thursday.

None of the 10 former outside directors was alleged to have participated directly in the accounting fraud that led to WorldCom's implosion. The company has since been reorganized as MCI of Ashburn, Va.

The size of the settlement and extent to which it forces outside directors to spend their own money to avoid litigation for corporate malfeasance has stunned observers.

"This is a watershed development by imposing personal liability on corporate directors beyond the scope of insurance coverage," said WorldCom's court-appointed corporate monitor, Richard C. Breeden, former chairman of the Securities and Exchange Commission. "It will send a shudder through boardrooms across America and has the potential to change the rules of the game."