At the May meeting of the New England Chapter of the National Association for Corporate Directors, the subject was that time-honored question: “what keeps the directors up at night?”  As it turns out, an awful lot.

A spirited panel included Ken Burnes (lead director at State Street), Ralph Verni (board chair of Eaton Vance Mutual Funds) and Kim Williams (professional director who among other posts serves on the Weyerhaeuser board).

The program started with a leading survey which contained a predictable list of “the top five”: executive compensation, board role in corporate strategy, CEO succession, board role in strategic management, and director recruitment.

The things that worried the NACD panel were, however, far broader.

• Do risk committees (or their equivalent) adequately identify risk?
• Is a company protected from cyber-attack in an age which is seen as encouraging a growth in corporate espionage?
• Is the high rate of pay in private companies disincentivizing proper staffing of public companies, where public comp is under intense scrutiny?
• In manufacturing companies, is capital made sufficiently available to drive both internal needs (for safe operating conditions) and external needs (emissions control, tsunamis, weather catastrophes)?
• Do directors sufficiently understand the company’s business and competitive climate to provide requisite guidance?

Much of the discussion circled back towards risk assessment.  It was noted that management always thinks that everything is under control, and it is the task of the board to dig deeply.  Directors were urged to “ask the stupid question” when they do not understand.  Other ways to make sure that boards are adequate to their risk assessment task include providing wide diversity of backgrounds on the board so as to spark discussion and understanding, and embracing current trends in board recruitment which look for specific skill sets to complete board’s skill requirements.

From a lawyering standpoint, I note that there was no discussion whatsoever of certain areas in which we lawyers know that much litigation against directors arises: nondisclosure of allegedly material information contemporaneously with a substantial drop in stock price; accusations of self-interest or lack of care in connection with acquisition transactions; lack of appropriate oversight of corporate affairs in a variety of areas including but not limited to the Foreign Corrupt Practices Act; the entire range of what lawyers call the Caremark duties of general supervision of corporate operations.