Chapter 28
Communicate Clearly, Consistently and Constantly

Moving beyond the hot buttons highlighted by the NYSE, we focus now on communication, a word all too frequently used in this book. Doing it well at all levels can make the difference between success and failure.

First, we must all remember to protect confidentiality of boardroom discussions. Confidentiality is essential for an effective board process and for the protection of the corporation. Moreover, directors generally owe a broad legal duty of confidentiality to the corporation with respect to information they learn about the corporation in the course of their duties.

Maintaining confidentiality is also essential for the protection of individual directors, given that directors can be held responsible for any misleading statements attributable to them. Even when a director believes the subject matter of his or her statements is within the public domain, it is good practice for an individual director to avoid commenting on matters concerning the corporation. A director who receives an inquiry may or may not have all of the relevant information, and his or her response could involve the corporation, as well as the director, in a disclosure violation. Directing public communications through a single spokesperson, such as the CEO, allows the corporation to speak with a unified voice.

Communicate the Right Things. Maintaining credibility and building mutual trust between board members and each other, between the board and management, employees, and between the corporation and its customers, vendors, investors, and lenders are absolute imperatives for the board to foster. All parties want to know that there is an engaged, thoughtful board overseeing a reasonable, long-term business strategy that is on track to achieve long-term value creation. Such communications should address the following:

Consider adopting the Integrated Reporting Framework developed by the International Integrated Reporting Council (IIRC) and/or the Global Reporting Initiative (GRI) both of which are designed to supplement financial reports to better align capital allocation and corporate behavior to wider goals of financial stability, sustainable development, long-term value creation and improved investor dialog.

Use the Right Methods of Engagement. Direct engagement through disclosure—including earnings calls, periodic reports, proxy statements and other SEC filings, the corporation’s website and the corporation’s social media presence is often the most practical means of engagement. In other cases, in-person meetings, one-on-one calls or interactive communications (such as at conferences or investor days) may be more effective or efficient. Whatever approach is taken, the key is quality rather than quantity. Establishing channels of communication in advance of a crisis or activist challenge is extremely important.

Determine Appropriate Director Involvement in Engagement Activities. Major institutional investors expect that a corporation will provide access to its independent directors, and these investors have stated that it will color their attitude toward a corporation if the corporation first begins to provide such access only after it has been attacked by an activist. Participating directors should be thoroughly briefed on discussion topics as well as the constraints of disclosure rules.