INTRODUCTION :: On January 24, 2005, the Wall Street Journal published a front-page article detailing confidential boardroom discussions at Hewlett-Packard’s (H-P) annual board meeting. The article described, in explicit detail, discussions about granting three named senior executives more authority over day-to-day operations of the company despite objections by Carly Fiorina, H-P’s then-chairwoman and chief executive. After the Wall Street Journal article caused rumors of management reorganization, the board fired Ms. Fiorina in February 2005. In May 2005, newly appointed chairwoman Patricia Dunn launched an investigation to determine who leaked information from H-P’s January 2005 board meeting. This investigation failed to identify the source of the leak.
In January 2006, C-NET published an article detailing long-term strategy discussions from the H-P board’s annual retreat. Although the article revealed mostly positive information, Dunn remained concerned about director leaks to the press. Dunn hired outside investigators who tailed suspected leakers and used pretexting to obtain private phone records of directors and of newspaper reporters covering H-P. Dunn clearly believed the leaks were damaging the corporation, no matter their content.
Before accepting a position on the board, H-P directors sign agreements stating that they will not grant unauthorized interviews, but many directors are not bound by confidentiality agreements. Accordingly, the H-P leaker, later identified as George Keyworth, might have violated his contractual duties to H-P by granting personal interviews to reporters. But is Keyworth liable to H-P shareholders for breaching his state-law fiduciary duties to the company? Surprisingly, the answer appears to be no; directors currently do not owe their corporations a general fiduciary duty of confidentiality.
Part II of this Note describes recent changes to the legal landscape in corporate governance. Part III outlines a director’s fiduciary duties under current Delaware law. Part IV describes how a general duty of confidentiality would fit squarely within a director’s duty of good faith. Finally, Part V analyzes the implications of recognizing a general duty of confidentiality before concluding that such a duty would benefit shareholders, directors, and investors.
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December 2013, Vol. 65, No. 6
Adam Mossoff, The Trespass Fallacy in Patent Law
Alan White & Carolina Reid (Essay), Saving Homes? Bankruptcies and Loan Modifications in the Foreclosure Crisis
Lee Harris, CEO Retention
Jennifer Koh, Rethinking Removability
Katrina Wyman & Nicolas Williams, Migrating Boundaries