Upon arrival, new directors are typically greeted by an avalanche of documents—including charters, reports, and financial statements. Even for the most seasoned governance experts and veteran directors, reading and processing this information load presents a challenge. For those who are stepping up to their first board assignments, it’s a particularly daunting prospect.
Daunting, yes – but by no means unmanageable. With the right preparation, boards can effectively organize these documents and bring new directors up to speed.
NACD has developed a new publication to assist boards in organizing their onboarding manuals. The Onboarding Bookprovides directors and their boards with a comprehensive, user-friendly roadmap. It is designed to help board members get to work quickly and confidently.
TheOnboarding Book is a compilation of templates that can be customized to any board or company. This publication includes resources for the board to communicate the essentials of the organization to new directors, including how corporate policy affects their work, what their responsibilities are, and how they will be evaluated.
Content includes sample bylaws, board and committee evaluations, organization charts, specific director responsibilities and duties, codes of ethics, insider training policies, and more.
TheOnboarding Book can also be an invaluable tool for smaller companies and startups that are establishing boards for the first time.
While there is no shortcut to learning the facts necessary to becoming an effective director, boards can organize the comprehensive documents, and thereby avoid inefficiency, repetition, or frustrating missteps. The Onboarding Bookis a go-to resource to assure that companies and their directors don’t miss a beat.
On Wednesday, it was revealed that one of the largest insider-trading cases seen in decades stemmed from a violation of boardroom policy. In the insider-trading trial of Raj Rajaratnam, Goldman Sachs CEO Lloyd Blankfein testified that former director Rajat Gupta violated the firm’s code of conduct in disclosing confidential information from 2008 board meetings. According to Blankfein’s testimony, Gupta allegedly revealed to Rajaratnam via telephone strategic discussions regarding the possibility of Goldman Sachs acquiring a commercial bank or insurance company, as well as advance notice of Berkshire Hathaway’s vitalizing five billion dollar investment in Goldman.
Often companies do not articulate boardroom confidentiality agreements, as confidentiality is implied in a director’s duty of loyalty. According to this fiduciary duty, a director cannot use confidential information for his or her own benefit, or to the benefit of a person or entity outside the company. However, a lack of clear policy would prove a weak defense for Gupta, as Goldman Sachs clearly defines a boardroom confidentiality policy in its corporate governance principles:
Confidentiality. The proceedings and deliberations of the board and its committees shall be confidential. Each director shall maintain the confidentiality of information received in connection with his or her service as a director.*
While confidentiality policies are not explicitly required, in 2000 the SEC enacted a policy to enhance fairness and transparency: Regulation Fair Disclosure, commonly referred to as “Reg FD.” With the intent to eliminate “selective disclosure,” Reg FD mandates that publicly traded companies must disclose material information to all investors at the same time. While this mandate does not necessarily extend to nonpublic boardroom discussions, the gray area created can be easily solved by including a code of conduct or other confidentiality agreement in the company’s corporate governance principles.