5 Ensure compliance with corporate governance guidelines and established practices. A company’s own corporate governance policies, committee mandates and position descriptions can all inform the reasonable expectations of shareholders and other potential complainants. Companies that, for whatever reason, do not comply with their own established policies, or whose policies deviate significantly from recognized best practices, may make themselves more vulnerable to oppression claims if the non-compliance and deviations cannot be adequately explained. Consequently, a company should ensure that its corporate governance policies have appropriate regard for best practices, tailored to the particular needs and situation of the company. At the same time, however, the company should also develop policies that are sufficiently flexible to provide guidance for both everyday and unusual corporate governance situations, including the efforts of an activist shareholder or other potential complainant. Should a company find it necessary or appropriate to amend or deviate from its publicly stated or usual governance practices, the reasons for the amendment or deviation – including why the particular amendment or deviation was considered necessary or appropriate – should be carefully documented. In addition, if ever a deviation from a guideline is indicated, the company should carefully consider whether the guideline remains appropriate and, if not, amend it accordingly to better meet actual needs and practices.
6 Manage the flow of information, having regard to mixed messages, privilege and confidentiality. Written communications (such as emails, texts, instant messages or personal notes), even if confidential, may be required to be produced in litigation. Board members and senior management should operate on the assumption that anything written on paper or electronically, unless clearly subject to privilege, may one day be reviewed by a complainant and/or a judge. PRIVILEGE Directors should be aware of three types of privilege in particular: (i) solicitor-client; (ii) litigation; and (iii) settlement. Solicitor-client privilege applies to confidential communications with an attorney for the purpose of obtaining legal advice. Litigation privilege is broader than solicitor-client privilege and applies to confidential communications, research, analyses and other documents created for the “dominant purpose” of litigation. Settlement privilege applies to confidential communications between opposing parties offering concessions to explore a settlement of existing or threatened litigation. Simply copying in-house or external counsel on a communication does not necessarily make the communication privileged. Moreover, using in-house or external counsel to relay non-privileged information likely does not cloak such otherwise non-protected information in privilege. To the contrary, the overinclusion of in-house or external counsel in communications unrelated to the provision of legal advice can make matters more difficult if it becomes necessary in the future to divide a potentially massive trove of materials into privileged and non-privileged categories.
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Governance Insights 2022
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