Data centers increasingly play a key role in corporate investment, construction, procurement and utilization decision-making, and the issues associated with data center governance should be addressed at the board level. A recent Weil memo highlights some of the key questions boards should be asking about data center governance. Here’s an excerpt:

1. Strategy and Operations. How do data centers tie into the company’s strategy and operations (e.g., do we build, lease, invest, finance, supply), what is the interplay between data centers and our AI strategy, and how do we expect data centers to meet our computing power needs now and in the future? What is the expected obsolescence of the data centers that the company has built, contracted for or otherwise invested in, and are we in a position to retool/retrofit if needed?

2. Monitoring Performance and Oversight. Who on the management team is responsible for data center-related activities and how are those activities factored into their compensation? What financial metrics and other information are they expected to report to the Board and how regularly? Do we have an information reporting system in place to surface issues to the Board as appropriate? Do we have a Board committee tasked with oversight of data center-related matters and do our minutes and materials reflect that?

3. Risk Oversight. Do we understand the risks involved with our data center activity and how the company manages and mitigates those risks? Are those risks built into our enterprise risk management framework, business resiliency plans and policies, and risk oversight processes? (Examples of key risks include power source problems, interconnection delays/latency, community opposition, obsolescence and events that could impact operations such as security or cybersecurity breach, natural disaster, extreme weather, war or terrorist attack.)

4. Delegation of Authority. What data center-related agreements are required to come to the Board for approval? Is this clear under our delegation of authority (e.g., because they involve expenditure over a certain amount or are otherwise material)?

5. Disclosure. What disclosures about data centers have we made in our public filings and other documents, and are the company’s disclosure controls and procedures up to date? What are our peer companies disclosing about data centers?

Other areas of inquiry for the board of directors identified by the memo include sustainability issues, regulation and compliance, governmental relations and shareholder engagement concerning data center-related activities.

– John Jenkins