During this time of "permacrisis," directors, no matter how experienced, must be ready and able to safeguard their organizations.
As part of Foley & Lardner's sponsorship of the NACD Northern California chapter, and together with Elizabeth Lampert PR, FTI Consulting, and Heffernan Insurance Brokers, we hosted an in-depth tabletop exercise on crisis management on Nov. 2, 2023, in Silicon Valley.
To kick off the exercise, NACD member Melinda Yee Franklin shared her experiences following the tragic plane crash and death of former Secretary of Commerce Ron Brown in a high-profile public relations crisis suffered by a major airline.
Moderator Elizabeth Lampert then led the first hypothetical exercise. Attendees were separated into five groups of six NACD members, each representing a large public company where the CEO makes a surprise announcement to the board about an unexpected health issue that would cause him to resign imminently. After initial questions and answers, Lampert dropped in additional twists and turns to the fact pattern about succession, including evaluations of specific candidates, pending investigations, the impact on customers, suppliers, and, importantly, other executives and employees. Foley's San Francisco office managing partner, Tom Carlucci, and Silicon Valley-based corporate partner Louis Lehot supported the exercise with governance, government enforcement, regulatory, and litigation advice.
Some tips shared by participating NACD members and experts included:
- Does the CEO need help or support, whether personally or professionally? (Empathy is a human emotion that connects, and supporting management is an important board function that inspires loyalty and trust.)
- Ask questions, ask questions, and ask more questions.
- What does the chief people officer know about a potential transition or separation, and what does that executive know about potential internal successors that have been identified?
- Follow the succession plan with a clear statement, considering internal and external stakeholders.
- Know your public disclosure requirements and when they kick in.
- There should be no other public comments or leaks besides public disclosure requirements.
- How might the succession impact key initiatives or major events at the company?
- Ensure your key executives in legal, finance, and people are in the room advising on potential impact to customers, suppliers, and employees.
- What will Wall Street, your chief financial officer, and head of investor relations think?
- Have a team of legal, human resources, communications, search, background check, and other advisors on standby.
FTI Consulting's managing director, Sara Sendek, led the second hypothetical exercise about a large, branded business being the subject of a cyberattack and ransom demand. Heffernan's Joe Talmadge provided salient information about the role of insurance at each step, and Foley's Carlucci and Lehot provided legal inputs.
Some tips shared by participating NACD members and experts included:
- Have an incident response plan with well-defined disclosure and communications components and a fully staffed team for each aspect.
- Test and update the incident response plan regularly.
- Do regular tabletop exercises at different levels of management to test and update the incident response plan.
- Board members should know the key players who run the company's information technology systems, including those running software and security and those who advise, service, and insure them.
- Board members should understand the key stakeholders, including management, employees, auditors, insurance carriers, customers, suppliers, government, and beyond.
- Map out your notification obligations for when perimeters have been breached.
- Assess ransom demands with those with experience with the players.
- Include your counsel, auditors, and cyber-insurance broker in the process.
NACD members enjoyed the exercise with each other over dinner and drinks hosted by co-sponsors Foley & Lardner, FTI Consulting, and Heffernan Insurance Brokers. They had a lively discussion on the responsibilities of directors that was industry agnostic.
As always, Foley worked with NACD directors Lisa Spivey and Kate Azima to create an intimate setting over cocktails and dinner in Palo Alto's bucolic venue, The Sea by Alexander's Steakhouse, to enable honest and authentic conversations, learning, and networking.