November 26, 2013

On a “Need to Know” Basis: How to “Read” Employees In

A while back, my good friend Jim Brashear of Zix Corporation sent these thoughts:

At a former employer, we did around a dozen M&A transactions each year. Depending on the scope of the project, we could have dozens of employees involved, in various offices around the globe.

We opted not to require manually-signed NDAs. There are delays and administrative time involved in sending, collecting and filing them. All employees signed a confidentiality agreement when they join the company. It seemed unnecessary to have them sign another confidentiality agreement for particular projects. Separate NDAs also potentially created the impression that information was only subject to confidential treatment if there were a separate NDA. We preferred to reinforce the applicability of the general confidentiality policy (or agreement) Finally, some executives were involved in many, many confidential projects, and it was bothersome to get manually signed NDAs from them each time.

Instead, we opted to send “confidentiality reminders” via email and required the employee to reply and acknowledge the reminder. The reminders stated the particular project was subject to the company’s confidentiality policy (or general confidentiality agreement), reminded the employee not to trade on non-public information about any of the companies involved, and described security procedures for the project. Not every project warranted the same levels of security, so we could tailor the reminders depending on the sensitivity of the project.

Also, we found that there tended to be two groups of disclosed employees. A small group that was aware of the entire scope of the project, the parties involved, and strategic implications – which we called the “full disclosure” group. Another group involved employees who had to do some work related to the project, and were generally aware that there was something unusual going on, but who did not have full visibility into the project – which we called the “limited disclosure” group. We managed the participant lists separately. The limited disclosure participants were not necessarily aware of all of the other employees working on the project. The full disclosure participants were informed about every employee who was disclosed, on either list.

Learn more about this topic in my checklist covering deal confidentiality pledges & reminders

Hot Topic: Do Independent Directors Matter?

An interesting development has been the emerging debate about whether the growth of the independent board is actually a good thing. In this Cooley alert, Cydney Posner outlines the debate. And former SEC Commissioner Roberta Karmel weighs in with her piece entitled “Is the Independent Director Model Broken?” Finally, Prof. Urska Velikonja weighs in this paper on “The Political Economy of Board Independence.”

Last week, the SEC posted its study on credit rating agency independence…

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– SEC Staffer: Significant Majority of Whistleblowers Reporting Internally First
– Director Conflicts: How Often to Monitor
– Is a $1 Billion Whistleblower Award from the SEC Coming?
– Report: Lack of Security in Board Communications
– Are Companies Ignoring the SEC’s Climate Risk Disclosure Guidance?

– Broc Romanek