Luis Villa <luis@...> writes:
tl;dr: the board did not effectively perform one of their most important roles (managing the ED); the board (and board candidates) should be talking about how they will fix that.
I think one of the key takeaways from this affair is that people should be careful about talking the law. There are bright line rules written in statute and then there are "duties" (duties of loyalty, duties of care). In this case, it appears that the bright line rule of law (absolute right of directors to inspect corporate books and records) was probably violated while more tenuous legal rules were given heavier weight. I'm also not sure that a few board members discussing something together unofficially without the entire board is a "conspiracy" as Denny described it, although I suppose that opens up a grey area about whether that's some sort of official meeting and the rights of board members to know about corporate business.
As far as I'm aware, there aren't too many bright line rules regarding abstract duties, although some statutes provide some good guidelines (e.g., Uniform Prudent Investor Act). After spending several years as a fiduciary for a couple different nonprofits and reviewing directors & officer's liability insurance as a regulator, I've found that it's no joke that the business judgment rule provides significant protection for board members from liability. Board members should be thinking more about right and wrong and what makes sense rather than abstract legal notions.
Any good legal opinion should be written and cite specific statutes and case law. And finding a case where a jury found someone, somewhere, in some specific situation was found to be liable for doing or not doing something is not necessarily persuasive.
I winced a bit when I saw a while back that Anne/Risker responded to a request for more details on the Executive Director's performance by saying that such information was basically sacrosant and something to the effect of how it might even be protected by some sort of UN human rights law. Maybe she knows something more than me, and certainly it is typical for these to be kept private, but many, many Americans have their performance evaluations subject to public scrutiny. See [http://www.splc.org/article/2015/04/accessing-personnel-records Accessing personnel records: A balancing act between privacy, public’s right to know] (2015) for some examples. It is true that California is aggressive about employee rights; when I was looking at actuarial analyses for employer's liability, California received a multiplicative factor of 3 versus the rest of the country.
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