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If you’re looking for some guidance to help directors understand what their fiduciary responsibilities require of them when responding to curveballs like President Trump’s tariff policy, you should check out this DLA Piper memo. It highlights the various risks and uncertainties companies face as a result of the new tariff regime, reviews the board’s fiduciary duties and offers some specific recommendations to help the board carry out its responsibilities.  Here’s an excerpt:

In the face of the potential business disruption, how can boards fulfill their fiduciary duties of care and loyalty and discharge their oversight responsibilities?

As with any other acute and emerging area of business risk, directors should understand the types and magnitude of the particular risks the Liberation Day tariffs pose for company operations and financial performance – and tailor their oversight role accordingly.

While it is management’s responsibility to identify and quantify the tariffs’ specific impacts on the company’s supply chain, manufacturing process, customer pricing, revenues, operating costs and profitability, liquidity, and financial position, directors can help ensure that the company’s existing risk management policies and procedures are commensurate to the tariff-related risks (or modified as appropriate) and remain consistent with the company’s long-term strategy and risk appetite.

Directors may consider delegating oversight responsibilities for tariff impact risks to a dedicated ad-hoc or standing committee (such as audit or risk).

As they assess the adequacy of the company’s risk management policies, boards may also consider retaining their own trade counsel to advise them on mitigating tariff-related risks.

Further, boards are encouraged to document their strategies for monitoring tariff-related risks. As with other areas of enterprise risk, documented control and monitoring functions tailored to the scope and scale of tariff-related risks could help directors avoid Caremark liability.

The memo goes on to recommend that directors consider asking senior management to regularly update the board on their approach to identifying and mitigating these risks, any material risk management lapses, and action plans for mitigation and response. It also suggests that since this is a fluid situation, the frequency of board meetings and calls may increase, and directors should remain available and engaged.

– John Jenkins