Refusing to defend an executive employee is purely a question of their contract and corporate policy. Although the Corporation may have a fiduciary duty depending on the transaction. The attorney-client priviledge is a very tricky thing; first it belongs to the client, second privledge may have various levels, work product, dicussion, notes could all be under a separate privledge; third privledge in a corporate setting can mean various things and may not be waiveable depending on the people invloved and the setting of the overall transaction involved in between those people. Remember, a corporation acts through its agents, so the privledge may not belong to the corporation, it may belong to an employee, it all just depends on very specific facts.