Before accepting a board nomination, directors should turn the tables and conduct their own investigation of the company they’re being asked to serve. The heightened governance environment created by SOX and exchange requirements means directors need comprehensive understanding of internal policies, financial performance and potential risks. Holland & Knight’s Chase Cole and Sidney Edgar map the essential due diligence process, emphasizing that proper preparation protects both individual directors and their ability to effectively govern from their first board meeting.
Every prospective director of a public company should conduct their due diligence before agreeing to serve on a board. Some private company boards also have outside directors who should consider similar information.
Directors of public companies labor under not only the watchful eye of Wall Street and shareholders but also the scrutiny of Congress, the SEC, state attorneys general, the news media and national stock exchanges. The Sarbanes-Oxley Act of 2002 (SOX) and both the New York Stock Exchange and Nasdaq have standards for corporate governance and independence and further define the duties and qualifications of directors who serve public companies. Most public companies are proactive to ensure that they are maintaining the highest…
