• Mon. Oct 3rd, 2022

The increased need for protection of directors and officers

ByJanice K. Merrill

Jun 13, 2022

Media coverage and global conflicts have drawn attention to corporate decision-making.

A number of factors – including an increase in domestic and international travel, cybersecurity vulnerabilities and privacy concerns, and an increase in geopolitical conflict – have resulted in an increased need for security and protection for members of the board of directors and senior management.

According to Jim Hayes, vice president of sports and entertainment at security firm Guidepost Solutions, many board members have been thrust into the public eye due to the importance of social media and the attention major decisions affecting stakeholders. And as we have seen with recent protests based on Roe v. Wade outside the homes of Supreme Court justices, the backlash on societal issues can often cause disputing parties to become a little too close to be comfortable. We spoke to Hayes about the need to protect board members and executives and additional factors that made it a more pressing priority.

Directors and Boards of Directors: What does executive protection mean with respect to board members? What aspects are protected?

Jim Hayes: When it comes to board members as well as executives, what we mean by executive protection is actually an overall safety program. That means your facility access controls, that means your cybersecurity monitoring and threat monitoring against the organization. Then, from a physical protection perspective, that’s how you physically secure the facilities, how you manage the movement of key executives. There are a lot more executives in the public eye now, thanks to a number of different factors. This can mean anything from the simple physical security of the facility to the presence of an actual security service, armed or unarmed, escorting a particular executive or group of executives from location to location. All day long. It can be protection that begins and ends during the working day. In some cases, where there is a significant threat, this may mean 24/7 protection at the workplace and home of the executive or group of executives. Many of these people will have multiple residences. They will do business in several cities, both at home and abroad, according to the organization. This will be a security program designed to protect all locations an executive and/or their family may be at any time. This is the most extreme example of executive protection, where every move is planned from sunrise to sunset for the executive or for family members. If you think of an analogy, it might be like how the secret service protects the president and vice president. You essentially choreograph every move to greatly mitigate the potential impact of any outside threat.

DB: What do you think are the factors that have led to the rise in cybersecurity concerns and privacy concerns for boards?

JH: Social networks and media in general. There’s a lot more media than there is actual news right now. It makes a lot of information public that wasn’t public 10 years ago. You have a CEO who is now in the public eye and doesn’t want to be. But his company can, in the eyes of some politicians, make too much money, or their products become controversial overnight because of some of the political issues that have been going on in the United States, I think those two things create a level of notoriety for people who are really just doing their job. They are trying to help their business make money. In many cases, these companies provide essential products and services. Now, all of a sudden, they’re in the headlines and the subject of media reports. You have people who can even make harmless threats, threats that they would never have the intention or the means to carry out. But you should always take these threats very seriously.

DB: What about the recent increase in geopolitical conflict that we’ve seen? Do you think this has led to an increase in dangerous situations for high-level board members? If so, what do you think are some of these issues?

JH: We spoke to a few companies that have business interests or do business, for example, in Ukraine and Russia, and there are many other hot spots. But it is the best known right now around the world. You have interests that say, “Well, you shouldn’t be doing business in Russia. There are a lot of people taking sides here. When you are a board member or executive of a multinational, global company, you may need to travel to these regions. It is a factor. We haven’t seen it being a huge factor here in the United States. I think there are obviously corporations and multinationals based here doing business there and in other places where there are conflicts. It’s one of those things that comes on top of the routine of planning executive travel, planning how you do business when you have employees in an area where there’s a conflict. There are a lot of different determinations that come into play, in terms of where the employees are, what type of industry. It is essential to have people physically there to do your business. We’ve all learned that there’s a lot that can be done remotely over the past couple of years. So part of that is advising all employees to stay out of certain situations until there’s a stabilization.

DB: What steps have you seen companies take that have been successful in protecting the safety of their directors and high-level executives?
JH: It starts with a security assessment. For companies and for executives, there is a tax advantage. Section 132 of the IRC states that in the event of a genuine security threat related to the business, the costs of a security program may be excluded from executive compensation. This means that for a security program to be labeled as a necessary business expense, a company should conduct an independent security assessment. What does this security program include? Does this include some type of executive protection for the executive? Does it include security assessments for all office installations as well as personally owned installations? Does this include protection of other executives or employees when it comes to executive travel or even, in the case of employees, travel to places where there may be a conflict? We have a travel security assessment that we have for many companies, and that’s something that will rely on a number of independent outside sources, such as the Overseas Advisory Council, to look at that what the US government is saying about the current situation or location. , and this will guide our recommendation to the company as to whether the trip is appropriate, whether we believe the trip involves any risks that need to be mitigated, or whether there are risks that can be mitigated when traveling to a location where a conflict is ongoing and unpredictable, like a country like Ukraine. It’s something where we would say, “Look, this risk is not something that we can mitigate. So your business has to decide if it’s really necessary for you to do this.