10/6/22 – Issue 7.89 – Your weekly news on all things board. 

Cyber safety. Companies are now more vulnerable than ever, and boards continuously have this matter top of mind. With the increase of lawsuits and pending regulations, boards must remain cognizant of the risks. This week, an activist investor sues the directors of Meta (formerly Facebook), citing the prioritization of profit over public safety. The drama continues for Elon Musk’s negotiated acquisition of Twitter as the social media giant’s board approves Musk’s most recent proposal. Meanwhile, as regulatory guidance for cyber oversight and disclosure reporting unfolds, it is increasingly important for your board to define their role in active cyber governance. And the trend for senior in-house counsel provides more than legal compliance – they are charged with partnering with the board as the voice of the corporation.

BOARDS ADD VALUE: At Boardspan, we spend a lot of time talking to board members about the ways they add value and the many challenges they’re facing. Check out this two-minute video that highlights what we’ve learned.

In the Spotlight

Meta Directors Sued by Activist Investor

“Meta Platforms board was by sued by a shareholder activist who says the directors put profit over public safety…The lawsuit was filed by James McRitchie, editor of Corporate Governance and a top proponent of shareholder proposals. He alleges that the leaders of the world’s largest social media company have pursued an ‘outdated’ approach to financial success that disregards the ‘high costs that Meta imposes on society and the economy’… The suit names as defendants Chief Executive Officer Mark Zuckerberg, ex-Chief Operating Officer Sheryl K. Sandberg, who remains on the board, and lead director Robert M. Kimmitt, as well as board members including Peggy Alford, Marc L. Andreessen, Andrew Houston, Nancy Killefer, Tracy Travis and Tony Xu…McRitchie argues that Meta has consciously ignored ‘red flags’ raised by past proposals urging the company to consider the harmful impact of its business models and has failed to revise corporate governance guidelines.” BLOOMBERG

Across the Board

Musk Reverses Course

"The tumultuous saga of Elon Musk's on-again off-again purchase of Twitter took a turn toward a conclusion Tuesday after the mercurial Tesla CEO proposed to buy the company at the originally agreed-on price of $44 billion. Musk made the surprising turnaround not on Twitter, as has been his custom, but in a letter to Twitter that the company disclosed in a filing Tuesday with the U.S. Securities and Exchange Commission…Twitter said it intends to close the transaction at $54.20 per share after receiving the letter from Musk. But the company stopped short of saying it's dropping its lawsuit against the billionaire Tesla CEO. Experts said that makes sense given the contentious relationship and lack of trust between the two parties…Musk has been trying to back out of the deal for several months after signing on to buy the San Francisco company in April. Shareholders have already approved the sale, and legal experts say Musk faced a huge challenge to defend against Twitter's lawsuit.” ABC NEWS

The Board’s Cyber Governance is More Than Just an IT Matter

“Cybersecurity is reaching an inflection point. Risks are growing and broader regulations are looming. Some companies are keeping pace, but others are lagging, both in disclosures and warding off threats. To close these gaps, directors should foster a culture of cooperation while elevating the tone at the top… This is the year for directors to double down on closing the gaps in the company’s cybersecurity defense and disclosure practices. The risks companies face, already high, are multiplying and accelerating, marked this year by potential threats tied to the war in Ukraine. Meanwhile, more guidance on cyber oversight and disclosure is here or on its way, from the Securities and Exchange Commission… With the stakes so high, directors’ tone at the top must continue to elevate the importance of managing cybersecurity risk on a company‑wide basis, and not just as an IT matter, and ensuring proper disclosure.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Opinion: Accepted Practices vs. Best Interest

“The best boards focus on solutions and structures tailored to their companies, ignoring cookie-cutter ‘gold standards’. Contrary to what good parents have long taught their children, it’s now acceptable in corporate governance to say, ‘everyone else is doing it, you should too.’ Advocates of so-called good governance urge companies to take specific actions because they ‘lag behind their peers’ on some favored practice…This is new. A generation ago, the norm in corporate governance was to recognize differences among companies, the need to tailor governance to fit needs, to shun cookie-cutter approaches… specialists take a micro-perspective on particular companies, including stock-picking shareholders, the directors who serve them, and analysts and researchers prepared to immerse themselves in the details of particular companies. Such cohorts would undoubtedly endorse universal practices that work, but they have an interest in resisting overgeneralized prescriptions.” DIRECTORS & BOARDS

Corporate Voice: General Counsel or the Board

“For in-house counsel, providing straightforward advice on a company’s compliance with the law is no longer enough. So-called stakeholder capitalism means companies are under pressure on all sides from investors to clients, consumers and campaigners to carry out business with integrity and transparency… And it is senior in-house lawyers that are increasingly tasked with satisfying these demands, as a business’s voice of conscience. General Counsel are increasingly taking on responsibility for environmental, social and governance (ESG) policies, which encompass areas such as climate change, human rights and diversity and inclusion.” FINANCIAL TIMES

From the Boardspan Library

Cybersecurity: Board of Director Litigation Risk

"In the Caremark 1996 decision, the Delaware Chancery Court stated that, in data breach actions, directors can be personally liable for failing to ‘appropriately monitor and supervise the enterprise.’ The court stressed that a company’s board of directors must make a good faith effort to implement an adequate corporate information and reporting system… Recently, courts have been deferential to companies that instituted an internal investigation committee and performed marginal investigations to refuse bringing forward a derivative lawsuit. The courts consider that a board’s decision to refuse to bring a derivative lawsuit is protected by the business judgment rule… Nevertheless, as cybersecurity breaches become more prevalent, litigation against directors is seemingly inevitable. To shield directors from liability against these breaches, a security program that is designed to thwart attackers can ensure the company’s protection of sensitive information while at the same time mitigating the risk of exposure.” JDSUPRA via BOARDSPAN

Seat at the Table 

• Industrial technology company Acuity Brands adds to its board Michael J Bender, former President and CEO of optical retailer Eyemart Express
• The Walt Disney Company elects to its board Carolyn Everson, former President of grocery delivery company Instacart

• McDonald’s welcomes to its board Kareem Daniel, Chairman of Disney Media and Entertainment Distribution at The Walt Disney Company

• Cold chain solutions company Carrier Global announced to its board of directors Susan Story, former President and CEO of public utility company American Water Works

• Cash management truck company Brinks elects to its board Keith Wyche, Corporate Officer and VP of Community Engagement and Support at Walmart

• USA Cycling welcomes to its board four members: Dereka Hendon, President at Major Taylor Iron Riders Cycling Club; Chad Blankenship, SVP of Professional Bull Riders; Melanie Strong, Founding Partner of venture capital firm Next Ventures; and Michael Cole, Level 2 USA Cycling Coach

• Software company JFrog elects to its board Yvonne Wassenaar, former CEO of software developer Puppet

• Grill company Traeger announced to its board Steven Richman, Group President of power tool company Milwaukee Tool

• Amusement parks company Cedar Fair appoints to its board Michelle McKinney Frymire, former CEO of travel management company CWT; and Jennifer Mason, Global Officer, Treasurer and Risk Management at Marriott International

• Biotechnology company Regeneron adds to its board of directors Dr. Craig Thompson, former President and CEO of Memorial Sloan Kettering Cancer Center

• General Motors elects to its board Jon McNeill, former COO of rideshare company Lyft

• Biopharmaceutical company Incyte welcomes to its board Dr. Susanne Schaffert, former President at Novartis Oncology

• Information database company Yext appoints to its board Evan Skorpen, Partner and Public Portfolio Manager at growth-stage investment fund Lead Edge Capital

• Commercial bank Cambridge Bancorp welcomes to its board Dr. Andy Zelleke, Senior Lecturer at Harvard Business School

• Residential furniture company Flexsteel elects to its board Jeanne McGovern, former Partner at consulting firm Deloitte & Touche

• Natural gas company Cheniere Energy adds to its board Brian Edwards, SVP Remanufacturing Division of the construction equipment company Caterpillar

• Enzyme engineering company Codexis elects to its board Rahul Singhvi, CEO of biomanufacturing company National Resilience

• Bioscience company Yield10 welcomes Dr. Willie Loh, former VP, Market Development, Global Edible Oils Division at global food corporation Cargill

About Boardspan
Boardspan is the leading provider of digital governance solutions for boards across all sectors. Our cloud-based assessments, benchmarking analytics and governance education programs complement our board search and advisory services to deliver a holistic approach to governance. Boards of all sizes and stages rely on Boardspan to deliver analytics, insights and outcomes that improve their effectiveness and performance. Clients include KKR, The Kellogg Foundation, Ingersoll Rand, Farfetch, McAfee, Beyond Meat, Box, e.l.f. Beauty, Satellite Healthcare and the U.S. Olympic & Paralympic Committee.