Business Litigation Alert: "2019 Outlook for Boards of Directors"
It is a new year, but many of the same issues that boards of directors faced in 2018 will still be significant issues as we move into 2019. We monitored the following topics closely last year and are continuing to track them in the new year.
- Diversity: In 2018, we saw an increased focus on board composition and a push for more diverse boards. California even instituted a statute to require a minimum number of women on boards of directors. In 2019, there will be a continuation of the focus on increasing board diversity. This can lead to more states following in California’s footsteps or a response to investor demand. Either way, greater diversity on the board is beneficial in numerous ways and leads to better oversight and decision making.
- Cybersecurity Issues: Privacy regulations made major headlines in 2018, with California passing its own privacy legislation and GDPR going into effect in Europe. The regulations surrounding how companies can use consumer data, how they must protect that data, and how they must report and handle any breach of that data are becoming more stringent as major data breaches continue to plague companies and consumers. In 2019, it is more important than ever that board members fully understand the relevant regulations so they can ensure that the company is fully compliant, and also have a functional understanding of cyber risk so that they can provide effective oversight.
- Crisis Management: In 2018, news of improper behavior from senior executives such as Elon Musk (Tesla), Les Moonves (CBS), and others generated a national discussion of how the board should handle this kind of behavior, and highlighted how damaging this behavior by one person can be to a company. In 2019, board leadership will continue to be tested by the conduct of their company’s officers. Success will be measured by how effective a board is in taking a proactive approach to deal with inappropriate actions by senior management.
There will be new issues facing boards in 2019 as well. We will certainly look at those as they arise, but these issues have staying power and will be key for boards to face head on in the new year.