Any successful and impartial board of directors includes outside directors, those who are not otherwise employed by the bank. This increases objectivity and different viewpoints, but it also comes with the issue of maintaining the confidentiality of non-public information. Institutions should review, and if necessary, revise their confidentiality policies to ensure they cover director misuse of confidential company information, but also director misuse of confidential board information.
A few common flaws that many confidentiality polices contain are:
- Using vague definitions of confidential information, such as not expressly covering material board information, and only discussing proprietary information about the company and not expressly considering scenarios involving director misuse of confidential board information.
- Not fully prohibiting directors from misusing confidential information. An example of this are polices that may prohibit directors from disclosing confidential information to third parties but not address whether directors can use confidential information for their own benefit or the benefit of others.
Well-drafted confidentiality policies should at least include the following elements:
- A broad definition of confidential information that covers all relevant information, including material board information;
- A list of examples of what types of information are confidential, which should include items such as board deliberations so that directors clearly understand that confidential board information is covered by the policy;
- An unambiguous statement that directors may not disclose confidential information to any other party, including principals or employees of any business entity which employs the director, or which has sponsored the director's election to the board, or misuse it in any other fashion, including by using it for their or someone else’s benefit;
- A very narrow set of circumstances in which directors are authorized to discuss confidential information, such as when required by law or when authorized by the board.
Confidential information can be easily stolen or recorded and disseminated, therefore it is important to guard against this happening to you. Protecting your interests with a solid confidentiality policy makes for clear expectations of board directors’ duties, as well as ensuring that confidentiality will be enforced with consequences for the violation of misusing confidential information.
The structure of a financial institution and its board of directors has many nuances. If you need assistance in drafting or revising company polices to effectively govern and inform your board of directors, contact the experienced attorneys at Goosmann Law in our Sioux City, Sioux Falls, and Omaha offices.