In the course of performing the fiduciary duties of directors Board members are entrusted with a lot of confidential information about their businesses. Certain of the information falls into the category of non-public material information, whose disclosure is restricted by laws and corporate policies. Other information, particularly in the context of for-profit businesses, is highly sensitive and private. The fact that certain information that is discussed in boardroom discussions is both sensitive and important creates a particular trust issue in the context of keeping that information safe from leaks.
Leaks can be disastrous to businesses and the individuals involved. They may not only affect the financial performance of the company but could also hurt the reputation of the individual directors. Based on the nature of the leak (and the circumstances surrounding it) they could expose directors to civil or criminal liability.
The best way to secure confidential documents for boards is to ensure that all parties signing the confidentiality agreement understand exactly what information is required to remain confidential, and have agreed to adhere to those conditions. This involves identifying the specific information that must be protected and clearly defining the limitations regarding the disclosure of that information, such as that it can only be disclosed to other directors or the company’s sponsor.
Additionally, it is important to have a comprehensive and detailed Confidentiality Policy that is provided to all directors (and their sponsors in the case of constituency directors) prior to the time they begin their tenure. This will ensure that they are aware of their responsibilities and help to create a culture that values the compliance with and the protection of confidential information as one of the most fundamental aspects of a director’s duties and obligations.