One of the principal duties of corporate directors and officers is the duty of confidentiality. That’s not just my personal opinion; it’s supported by case law, corporate governance treatises, law review articles, and more. Generally viewed as a subset of the duty of loyalty, the duty of confidentiality means that directors and officers are expected to keep their knowledge of the company to themselves or, at a minimum, to disseminate it on a strict “need to know” basis.
My conviction (all puns intended) was reinforced some years ago, when Rajat Gupta, the former CEO of McKinsey and a member of the board of Goldman Sachs, among others, was convicted of insider trading for spilling secrets he learned in Goldman’s board room to Raj Rajaratnam. Following his conviction, there was a flurry of activity among corporate governance nerds (present company included) as to the appropriateness and reasonability of asking directors and officers to enter into confidentiality agreements with the companies they served. It seemed to me at the time that asking a member of your board – a person charged with oversight of your company, and effectively your boss – to sign a confidentiality agreement might be viewed as insulting or worse.
Events, both recent and not-so-recent, are changing my mind. To start with the not-so-recent, in my many years of in-house practice, I came across the occasional director or officer who, to put it bluntly, was a media whore. They love seeing their names in the paper and being quoted as authorities. I get that; I’ve been quoted in some publications, and it’s very nice. However, in at least one case, a director’s leaks to a reporter resulted in my getting calls from that reporter, literally demanding that I provide information, some of which was clearly privileged, arguing that if it was good enough for a board member it was good enough for me. (I declined.)
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