Maintaining Board Confidentiality

by Charles Nathan, for The Harvard Law School Forum at Harvard Law School, January 23, 2010.

The increasing success of shareholder activists in designating or electing directors is altering the composition of public company boards. It is also posing challenges to long-held assumptions about the sanctity of board deliberations and the nature of a director’s confidentiality obligations to fellow directors and the company.

The almost certain advent of proxy access will exacerbate these issues because it will inevitably increase the number of shareholder-nominated directors in the board room.

Notwithstanding the theoretical implications of the legal principle that a director, no matter how nominated or by whom, owes fiduciary duties to all shareholders, as a practical matter shareholder-nominated directors are often viewed, and in fact act, as representatives of their shareholder sponsors—what some call “special interest” or “constituency” directors.

The presence of constituency directors in a board room heightens concerns about confidentiality in two important, but often distinct, realms…(continue reading)

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