There’s a New Cyber Sheriff in Town

“Data protection” is an umbrella concept that incorporates both cybersecurity and data privacy.  The European Union has been the leader in advancing this concept first with its Data Protection Directive and now with its General Data Protection Regulation.  The influence of these laws on the U.S. has been profound.  Recently, the SEC issued guidance for publicly-traded companies mandating, among other things, notification of data breaches within four days and publication of the company’s cybersecurity risk management processes.  Such national-level breach notification mandates have appeared in other contexts in the U.S. as well as the EU.  Moreover, the advent of generative artificial intelligence has greatly amplified the power of cyber threat actors. Private companies that conduct business with public companies or may merge with a public company will likely wish to adhere to these standards as well.  Overall, data protection is now a board-level matter.

As board members, we grapple with formidable challenges in overseeing AI governance to ensure responsible and ethical implementation. Instances of biases and discriminatory outcomes in AI systems, particularly in hiring and financial processes, demand our attention to uphold fairness. The escalating complexity of AI decision-making processes raises concerns about accountability and transparency, necessitating our proactive addressal. Recognizing the urgency in navigating data privacy challenges to comply with regulations and prevent potential misuse of personal information, we must align our AI strategies with evolving global legal frameworks to avert legal repercussions and reputational risks.

Chief security officers must communicate with the Board in a risk-focused, business-aligned, and data-centric manner to inspire confidence in management.

The Consequences of the OpenAI SAGA Continue to Evolve

There has been a lot of news about OpenAI in the past few months. 

The three objectives of this blog are: to 1) share the extraordinary risks of AI; 2) give a little history on the company OpenAI, as well as the stunning ouster and reinstatement of their CEO; and 3) most importantly, explore best practices for board members in case they encounter a situation similar to the ones faced by OpenAI’s board.  We'll focus on two key aspects of board governance: first, when the board feels that communication from the CEO is not consistent and hampers their ability to fulfill their responsibilities; and second, the considerations involved in evaluating the removal of a CEO from office.

Commemorating a Decade of Enhancing Private Company Value

Chicago, Illinois, Feb. 13, 2024 – The Private Directors Association (PDA), the only national association dedicated to improving private companies' growth and sustainability through board governance, is proud to announce the 10th anniversary of its founding. Established in 2014, PDA has flourished into a burgeoning national ecosystem, counting over 3,300 business executives, corporate members, and sponsors whose shared mission is to advocate for excellence in private company board formation and governance practices. 

Reflecting on the organization's accomplishments, Elaine Eisenman, PDA's Board Chair, remarked, "I am honored to chair the PDA Board of Directors during this landmark year in PDA's history. Since our inception in 2014, we've strived to serve private companies across the globe with the resources to sustain their growth through excellence in board governance practices. The Private Directors Association extends heartfelt gratitude to the founding members whose vision and dedication paved the way for our future success." 

A Key Competency for Board and Advisory Directors

The ability to pose incisive questions is not merely a skill; rather, it is an art form.  Used in company governance, it wields transformative influence over the trajectory and vitality of an organization.  As a seasoned board director, I have borne witness to the profound impact that the art of questioning can have on steering effective decision-making, fostering transparency, and cultivating a culture of accountability and innovation.  In this article, I seek to delve into the profound importance of mastering this art for board directors, drawing insights from the National Association of Corporate Directors (NACD) 2023 Blue Ribbon Commission Report, "Culture as the Foundation: Building a High-Performance Board."

Questions to Ask in the Boardroom

1. How does your board handle discussions about age, race, or the LGBTQ+ community, since these groups help to diversify a board?
2. What are old and new baselines for boards to consider about age, race, and the LGBTQ+ community as they diversify the board?

The Establishment of Old and New Baselines for Establishing Diversity on a Board

The original guidelines, or baselines, are described in a book where the authors address separate areas (Miller, F. A., & Katz, J. H. 2002. The Inclusion Breakthrough : Unleashing the Real Power of Diversity. San Fransisco: Berrett-Kohler Publishers).  The book also addresses what have emerged as new baselines in these areas. I have used their descriptions as a starting point and expanded upon them based on my own professional experience to provide the description of old and new baselines that will follow in this article.  

Wolfe’s proven success in transforming leadership approaches and perspectives promises to elevate the PDA Nashville Chapter to the next level of visibility and impact.

Nashville, Tennessee – January 30, 2024 –The Private Directors Association (PDA) is delighted to announce the appointment of Marc A. Wolfe as the President of its Nashville Chapter. With a rich history of leadership and a commitment to enhancing private company impact, Wolfe brings a wealth of experience and expertise to guide the Nashville Chapter to a level that matches the city’s growth.

Our world is experiencing the acceleration of systemic changes with unprecedented consequences to our capacity to make sense, know, and exert control over nature and one another.¹ In January 2000, the late Stephen Hawking- who is regarded by many as one of the most impactful theoretical physicists of all time- stated that the “next century will be the century of complexity.”² Today, we live in a hyper-connected world with unprecedented access to knowledge that fuels the perpetual creation of new technology, boundless choices, and unlimited possibilities. This change in dynamic directly affects boards of directors.

Questions to Ask in the Boardroom

1. What do you know about Affirmative Action and what was the result of it?
2. What were the concepts stated in Affirmative Action documents that would form a greater appreciation of identity groups such as age, race, gender?

Introduction

In this article, I will provide a brief summary of historical statements about Affirmative Action and references that offer more information on Affirmative Action. The concepts stated in the presidential orders were to establish a more equitable society and allow us to utilize the valuable human resources we have in the United States. When studied, Affirmative Action allows each of us to focus on promoting the human rights of all people in the United States. 

In today's digital age, where every company increasingly relies on data and technology, the intersection of artificial intelligence (AI) and cybersecurity is a critical and evolving battleground.  As organizations navigate the complex landscape of threats and vulnerabilities, the role of AI in enhancing cybersecurity is going to increase and as a result will impact private companies and their governance.

Research by Forbes shows that delivering messages via storytelling can be up to 22 times more memorable than merely relying on just facts.  And that's the reason to have this educational conversation on the Five Cs of great storytelling.  To get going, let’s take a walk through each of the Cs and consider the different process steps that transform the delivery of a message through the art of great storytelling.

In the complex and ever-changing world of business, private company boards of directors face a multitude of challenges, from navigating regulatory landscapes to mitigating emerging risks. In this dynamic environment, internal audit emerges as a critical asset, providing invaluable insights and guidance to enhance governance, strengthen operations, and achieve strategic objectives.

Consider that OpenAI’s ChatGPT is … barely a year old.  Yet recently, there’s been tremendous focus on AI (Artificial Intelligence) and regulating it.  The key question is what does, and what will, AI oversight mean to board members in the short and long term?

Questions to Ask in the Boardroom

1. What are five values that are defined and utilized to support the board’s mission?
2. How do board members identify their actions and behavior in the board meetings that show appreciation for the board values?

Taking the Next Step

I have another exercise I do with boards that continues the process of bringing members together by helping them to coalesce around a common set of values.  These board values are based on board members first identifying their five most important personal values and then identifying a set of shared values from everyone’s personal values meant to guide the actions of the board.

Private companies typically do not audit their books unless an outside party requires it. Audits are a material expense and require great effort.

The ascent of Artificial Intelligence (AI) from a mere buzzword to a transformative powerhouse has been swift and all-encompassing, spanning various industries. Yet, this progress has brought to the fore a crucial concern – AI equity. Once a subject of philosophical debates, AI equity has evolved into a strategic imperative that resonates deeply within the domain of corporate governance. Beyond its ethical dimensions, AI equity now encompasses legal adherence, strategic significance, and the nurturing of stakeholder confidence. This piece delves into the multifaceted significance of AI equity for both private and public company boards, examining its strategic implications, legal obligations, and its role in fostering transparency and accountability.

AI is here to stay, and it’s incredible. But it also comes with terrifying risks that we’ve heard about in the press including IBM’s Watson, who debuted on Jeopardy in 2011, and then later in 2021, in the Healthcare space, failed sometimes under 50% of the time against human clinicians.  (https://www.theregister.com/2022/01/31/machine_learning_the_hard_way/). 

In today's rapidly evolving digital landscape, the governance of private companies faces unprecedented challenges in safeguarding sensitive data, maintaining customer trust, and complying with an array of regulations. As technology continues to transform industries, the importance of a robust security framework cannot be overstated. This article explores the significance of adopting reputable security frameworks, such as the National Institute of Standards and Technology (NIST) framework, in the governance of private companies.

Renowned Association Management Executive Chosen to Lead National Association Dedicated to Serving Private Company Boards and Directors