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Corporate Board Members and Conflicts of Interests are Not a Good Match

April 20, 2017

Posted in Corporate Law

Corporate board members can have a tremendous, beneficial impact on a company. If they have they company’s best interests at heart and have relevant but diverse backgrounds their input can help guide a company through tough times into much better times. That’s a difficult task if a board member has a connection to a competitor or potential competitor. Every board member has a fiduciary duty to the corporation to act in its bests interests and not use his or her access to benefit a competitor.
In the evolving world of autonomous vehicles companies that weren’t building vehicles in the past may be building them in the future. Two of those companies are Google and Uber. This summer David Drummond, the chief legal officer at Google parent Alphabet Inc., stepped down from Uber’s board of directors, citing a conflict of interest. Drummond joined Uber’s board of directors in August 2013, according to TechCrunch.
This issue has been simmering for a while. Uber’s first fleet of self-driving cars is running in Pittsburgh. The cars are modified Volvo XC90’s, co-piloted by an engineer who can take the wheel when necessary. Google is also working on its own self driving cars. A joint venture between Google and Ford enabling both to leverage their technologies with Ford’s expertise creating cars and Google’s ability to deliver software has yet to come to fruition.
There were earlier reports that Drummond was left out of board meetings at Uber, perhaps in fear of important information finding its way to a competitor. Uber predicts a future where people don’t own cars but pay as they go, paying Uber to transport them in driver-less cars where and when they want. Google also foresees a future of self-driving cars though what it has shown is a far more radical, steering wheel-free cruiser.
Despite these conflicts the two companies are still very much joined together. Drummond joined Uber’s board of directors after Google Ventures led a $360 million investment into the company, committing $258 million.
Transparency is needed when corporate boards discuss issues and make important decisions.
• Board members need to be able to identify conflicts of interest and disclose them so decisions can be made as to whether the person should remain a board member or simply be excluded from discussion and decisions on a particular matter.
• This level of transparency makes board members more confident about their decisions and should generate more confidence by outsiders concerning the corporation.
Potential conflicts include a board member associated with a company that does business with the corporation or in this case is associated with a competitor. A conflict also arises if a board member uses the information he or she has obtained to personally benefit from starting a new, competing company, or joining an existing competitor. When deciding who should be a part of a corporate board a potential conflict of interest is an important issue to consider, but not the only one.
If you’re the CEO or director of a corporation and have questions about your own possible conflicts of interests or conflicts that may involve board members, contact our office so we can discuss what’s going on, how the law may apply and the best steps you should take moving forward.