The board's governance and innovations committees may benefit from a briefing on the conflicts of interest implications of Sheryl Sandberg of Facebook and Jack Dorsey of Twitter's recent decision not to run for re-election to The Walt Disney Company board of directors.
According to a statement from Disney, the decision of these prominent business leaders was based upon the evolving nature of the businesses in which Ms. Sandberg and Mr. Dorsey are active, which has made it more difficult for them to avoid potential conflicts with Disney's initiatives (e.g., online video). But don't think that this issue is limited to the giant entertainment, media and technology companies. Perhaps more than before, companies across many industry sectors are retooling their strategic direction and business models to address challenges and opportunities presented by the economy, tax legislation, government regulation and legislation, consumer preferences and, particularly, "disruptive" innovation.
For those reasons, the Sandberg/Dorsey/Disney development is a useful example of how increasing corporate diversification and business model evolution are recalibrating concepts of competition in a way that strains the effectiveness of board conflict of interest policies. Going forward, boards and individual directors may need to think more expansively about relationships and arrangements because of increasing difficulty in avoiding conflicts of interest on board issues. This also means taking a second look at existing policy provisions that define the types of financial arrangements, employment relationships and outside board service that could give rise to a conflict of interest. It also means revisiting the scope of the conflicts of interest questionnaire and the types of information it seeks to generate. Disclosure obligations based upon pre-existing or obsolete concepts of competitive interest may no longer provide a reliable means for "flagging" potentially problematic relationships or arrangements. This, with potential implications for the sustainability of corporate agreements, and the reputation of individual directors.
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