5 Things You Should Be Doing To Help Protect Your Board Of Directors

5 Things You Should Be Doing To Help Protect Your Board Of Directors

A group of individuals that are elected to represent shareholders is called the Board of Directors. A board’s responsibility is to establish policies for corporate management and to  make decisions on major company-related issues. Every public company consists of a Board of Directors. Some non-profit and private organisations also have a Board of Directors. The directors control the company’s affairs and act as its agents. The directors of your company are responsible for its day-to-day management. 

The Board of Directors means a lot to an organisation and good organisations protect their Board of Directors from:

  • Straying down on the wrong path
  • Setting themselves up for potential exposure from lawsuits or regulatory sanctions.

Here are some necessary measures that you should take to protect your Board of Directors, regardless of whether your company is private or public:

  1. Ensure Your Directors Know Their Core Duties

Firstly, make sure that members of your company’s Board of Directors understand their responsibilities well. All directors owe their organisation: 

  • Duty of Loyalty

Duty of loyalty means that they will act in the best interests of the company and not to themselves or any other person or entity which they may be attached to. 

  • Duty of Care

Duty of care means they perform their responsibilities after considering and reviewing all applicable information available to them.

  • Duty of Good Faith and Fair Dealing

Duty of fair dealing is the part of the Duty of Loyalty, which means acting with good faith that the actions taken are and will always be in the best interests of the organisation.

Also, make sure that the Director’s duties are refreshed with them I.e. reminded to, and renewed with them at least once annually. In addition to these duties, make sure you provide avenues and mechanisms for Directors to speak up about any conflicts that they feel may cause trouble in the future.

 

  • Provide Regular Updates on Governance Issues

 

Regularly update your board on crucial developments in the area of corporate governance. Make it a habit and update them on anything such as:

  • New regulations, 
  • New court decisions, 
  • Issues raised by proxy advisory services (In Govern Research Services, Institutional Investor Advisory Services India Limited)
  • Activist shareholders
  1. Include the Board in Crisis Planning

If your company is going through a crisis, let your Board of Directors know about it. You should not inform your Board of Directors at the last moment. Instead, your planning should include things such as:

  • When is the right time to inform the Board about a crisis?
  • Who will communicate with your Directors?
  • How will your Directors get updates about the crisis?
  • Contact information of the Directors including alternative email accounts and phone numbers

This means that you need to consider and include the Board as you design documents and procedures related to your crisis planning. With the right communication and planning, the Directors will quickly see the value in incorporating them more closely into your crisis planning.

  1. Provide a Company Email Account

The biggest mistake that many organisations make is that they communicate to their Directors simply using their personal or business email accounts, which is wrong. Instead, set up a company email account for each Director and conduct all company business with the Directors via company email. This way, if there is an investigation or litigation, the emails whould be limited to company email accounts and not extend to the Director’s business or personal accounts and this way, you can protect your Board of Directors.

Additionally, emails on company accounts are meant to help your records and also aid your   retention program.  Hence even if it is an additional effort for your Directors to manage an additional email account, there are major benefits of doing so.  You should provide Directors with a Director Portal to store :

  • Board books
  • Resolutions
  • Calendars
  • Minutes
  • Agenda
  • Other communications 
  • Board business can be conducted.

  A director portal will allow you to properly manage record retention related to the Board.

  1. Provide Appropriate Indemnity Agreements And D&O Lawsuit Insurance

While it’s great to take steps to avoid problems, and it should be your prime focus, there will be times when things might go wrong, and your Director will get sued by employees, vendors, competitors, investors, customers, or other parties, for actual or alleged wrongful acts related to their service on the Board.

You need to prepare for this by ensuring that the company properly indemnifies the Directors and that the company has secured sufficient cover with a good quality Directors & Officers (“D&O”) lawsuit insurance. D&O lawsuit insurance secures the personal assets of corporate directors and officers, and their spouses. 

D&O Lawsuit Insurance is required for the following events-

  1. Accounting irregularities
  2. Exposures relating to mergers and acquisitions
  3. Corporate Governance requirements
  4. Vulnerability to shareholder/stakeholder claims
  5. Harassment allegations
  6. Regulatory investigations

We at SecureNow help you compare D&O Lawsuit or D&O liability Insurances of various companies so that you can choose the one that suits you the best.

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