ARTICLE

There is a common perception that boardroom confidentiality cannot be easily compromised. Directors rely on confidentiality to make the right decisions and help advance a company’s operations. But external factors are driving change. While directors have a fiduciary duty to maintain confidentiality of corporate information, new advancements in technology and communication make it easier for a potential leak to occur.

The Hewlett Packard (HP) scandal, which unfolded almost 10 years ago is a landmark case that demonstrates what can happen when critical boardroom information falls into the wrong hands. News reports highlighted that the computer manufacturer became frustrated in light of damaging leaks of sensitive boardroom discussions before its Chief Executive Carly Fiorina, announced her departure. The “spy scandal” shook Silicon Valley as it unmasked the breach of confidentiality issues surrounding HP’s boardroom. Tactics included a series of sting operations and in some cases impersonating directors and journalists to gain access to private phone records—a practice commonly referred to as “pretexting”.

Fast forward 10 years later and the problem of boardroom confidentiality still exists. In an era where information can travel instantaneously, companies have placed a renewed focus on how directors handle sensitive information. Ensuring that directors act in the interest of the corporation without taking their personal interests into account can be difficult to monitor.

According to a recent post on the Harvard Law School Forum on Corporate Governance and Financial Regulation, companies can take a few steps to minimize the risk of boardroom leaks. They are as follows:

  • Rolling out comprehensive confidentiality policies that apply to all directors. These policies should go into greater detail about confidential information and remind directors of their fiduciary duty to the company.
  • Companies should require directors to sign confidentiality agreements upon election or as a prerequisite to nomination.
  • Companies can promote a culture of confidentiality through regular training and reviews of the company’s confidentiality policy.
  • Create an atmosphere where directors feel safe to disagree with other board members. In turn, this will foster healthy relationships inside the boardroom and can mitigate the risk of a director venting his concerns outside an organization.

Read the full post here.

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