The inappropriate handling of classified government documents by former and current elected officials has become both a palm-to-forehead concern for the public and fodder for late-night television comedians. But in reality, it’s an issue that also has critical implications for other segments of the workforce.
As Seth Myers recently joked on his Late Night show, “Man, this is starting to feel like the beginning of the pandemic. You hear about one case, then another and before you know it, we’re all going to be locked in our apartments wiping down our mail, terrified that some classified documents are going to get in.”
Indeed, it’s a relevant issue for corporate leaders, who by the nature of their work have access to highly confidential and proprietary company information. To the extent that such material, nonpublic information is carelessly handled, or misused—particularly as these leaders transition from their board service or employment status –it can become a significant legal concern for their companies, and themselves.
So in many ways, the current, near-comedic news about classified government records offers a practical reminder to organizational leaders not only to be careful with the handling of confidential data they regularly work with, but also with the disposition of that data when they leave their position. When considered in that context, it becomes a whole lot less funny.
Just what kind of stuff are we worried about? Certainly not government secrets, national security matters or correspondence with foreign officials. Not even salacious information about other heads of state.
Rather, we’re talking about reports, correspondence, memoranda, strategic plans, legal advice, research results, trade secrets, customer lists and the like. It’s material that’s periodically disseminated within the leadership team in the course of sensitive discourse, strategic planning, regulatory filings and, sometimes, legal compliance and defense. Some of it may be subject to legal privilege. And if it finds its way into the public discourse, it could create financial, reputational, legal or strategic harm to the company.
It’s a big issue for corporate executives, given their greater professional mobility as well as their performance accountability. Executives are simply more on the move than ever before-and the disposition of their files (electronic or otherwise) may not be high on their personal transition list.
Generally speaking, their obligation to maintain the confidentiality of proprietary corporate information is most likely to be covered by the terms of their executive employment agreement, by confidentiality and non-disclosure agreements, by compliance requirements and antitrust protocols, and by corporate and human resources policies and procedures.
These agreements are typically explicit in their terms and in the protections they afford the company concerning the unauthorized use of confidential corporate documentation. Companies are much more willing today to take legal action against departing executives who they believe have violated the terms of such agreements, regardless of whether the violation was intentional or inadvertent. Thus executives and other critical employees are highly motivated to assure compliance with these agreements when departing a company.
The confidentiality concern may be less clear to board members completing their term of service with a company, or who are otherwise departing the board on favorable terms. Absent helpful offboarding assistance from the company, they are less likely to be sensitive to the need to manage the scope of proprietary data accumulated in their files, whether electronic or paper. They’re done with the company and the board; what’s the big deal?
For departing directors, the “big deal” may be state law or other guidance that suggests that their fiduciary duty of loyalty to the corporation (especially as to maintaining the confidentiality of proprietary information) may extend beyond the finite period of their board service. The risk is that the subsequent disclosure, reliance on or other use of confidential information obtained during the period of board service could expose the former director to personal liability.
This would especially be the case if the use of confidential information was intentional; perhaps less so if the information was contained in a box in the attic or stuffed behind the fertilizer bag in the garage. And there’s also the speed with which once-confidential data becomes not-so-confidential. But there’ll always be certain organizational expectations about how that information should be handled.
Just as with executives, departing board members should be highly motivated to work with the company’s governance support personnel to properly dispose of confidential information upon the end of their service. And the company and its legal, compliance and governance officials should be highly motivated to work with those executives and board members to protect stakeholder interests as it relates to confidential matters.
As the long running controversy has now nestled in Carmel, Indiana (after stops in Mar-a-Lago and Wilmington), the message has become clear. Everyone’s on notice now; it’s not just an ex-president or ex-vice president who should be concerned if he has confidential documents stored in the basement, in the station wagon or at the lake house.
So the next time a corporate leader is inclined to laugh at a Jimmy Kimmel, Stephen Colbert or Jimmy Fallon joke about government secrets, they should think again-because the joke may ultimately be on them.