Post Office and #MeToo scandals show dangers of board confidentiality policies: Barry Gamble
Acting properly in relation to confidential information in the boardroom seems straightforward enough but in practice may be a test for board directors.
Although commonly reinforced through service and employment contracts, obligations to keep board business confidential should be primarily a matter of trust and probity for directors.
There may in addition be non-disclosure agreements (‘NDA’) relating to a particular transaction.
Clearly commercially and financially sensitive information should be safeguarded. But not all information reaching the board will necessarily come through controlled channels. It may not even be considered to be strictly confidential as such but it may still need to be treated with great care.
Boards may not always have control of the narrative when rumours surface in the press, through social media or old-fashioned gossip. These might relate to customers, employees, suppliers, shareholders or other stakeholders; even to the board or individual directors, preceded or be followed by a whistleblowing report.
The problem arises when a board become fixated on protecting its own reputation and that becomes the primary focus rather than properly dealing with the issue which has arisen. So the obligation of board confidentiality may have the perverse effect of containing the ill rather than exposing it.
The intimidation and abuse which gave rise to the #MeToo movement reminds us all too starkly how NDAs served to hide or even facilitate bad behaviour. These should never be a shield for the organisation at the expense of the wronged.
By failing to take action and respond boards might succeed in protecting their reputation in the short-term but make the situation much worse in the long-term even risking the survival of the organisation.
The Post Office Board managed to keep the issues surrounding prosecutions of sub-postmasters confidential, tying them up with NDAs with the result that only those prepared to run huge personal risk of prosecution ensured this broke cover. Such institutional level failures are by no means uncommon.
The US-centric National Association of Corporate Directors in a paper ‘Fit for the future - an urgent imperative for board leadership’ argues, somewhat radically perhaps, for boards to behave as if anything they say and do may escape the confines of the boardroom to reach the public domain.
They urge that boards should avoid creating an aura of behind closed doors mystique by offering visibility into their workings
This might be a tough call for many a board and no one wants an indiscreet director but this is an interesting thinking frame. Board directors should always try to ensure their decisions might pass the ‘smell test’ and recognise that allowing daylight in may be the best disinfectant for good board process.
Barry Gamble is an experienced board director, chairman of Boardroom City Debates, a member of the Institute of Directors Commission ‘NEDs reimagined’ and of the IOD working party to the report ‘The Post Office Scandal, a failure of governance’. On Tuesday 30 June he will be chairing the ICAEW City Debate.