Optional_2023 Board Resources

Question: What are the conflict issues?

There are multiple conflict issues in this actual situation involving James Ramsey and the University of Louisville. First, Mr. Ramone has potential breaches of his fiduciary duty of loyalty as a Foundation board member and duties of loyalty as an University and Foundation executive based on the allegations of paying himself and others excessive compensation (self-dealing) and duty of care in failing to properly manage the University and Foundation finances and business affairs. The other Foundation and University board members have potential violations of their duty of care for failure to exercise appropriate oversight of executive management. In setting compensation, board members should have asked questions to ensure that the compensation was appropriate. Further, board members should have exercised better oversight over spending and other activities to ensure that management was following board-approved direction and properly exercising management’s authority. One of the causes of this situation could have been Mr. Ramone’s role as permanent chair of the Foundation’s board member nominating committee. This role creates potential personal conflicts in Mr. Ramone influencing the nominating process to favor individuals with which he has a personal relationship, and once on the board, those members either feel indebted to him for the position or are inclined to defer to him and not question his activities because of their personal relationship. For much of its existence, Walt Disney Co. has pursued new and innovative media ventures as a growth strategy. In recent years, this growth strategy has included online media outlets. Disney also has developed close ties with the tech industry, beginning with the late Steve Jobs serving as a board member (and once the largest shareholder). For the past five years, Sheryl Sandberg, the COO of Facebook, and Jack Dorsey, the CEO of Twitter, served as directors on Disney’s board. During that time, Disney pursued an attempted acquisition of Twitter. Twitter and Facebook have also bid on, and in some cases won, the rights to stream live sporting events – in competition with Disney’s ESPN cable network. Both Twitter and Facebook have expanded their relationships with other media companies in the last year to add to their online video presence. Hypo 2: Board Conflicts – Duty of Loyalty Ms. Sandberg andMr. Dorsey have essentially the same type of conflict issue – their Disney director duties of loyalty are impacted by their duties of loyalty to their respective companies as officers. Specifically, directors owe a duty of loyalty to their organization to not pursue business opportunities for others (or themselves) that would be in the interest of the organization. Question: Assuming Sandberg and Dorsey disclosed their outside relationships to Disney before being elected to the board, doesn’t that disclosure address the conflict issue? No. Disclosure of outside interests and activities that could pose a conflict to the organization is a way to manage conflicts. Once on the board, Ms. Sandberg, Mr. Dorsey, and the rest of the board would need to actively manage their work with those conflicts in mind. Most obviously, Mr. Dorsey would have Question: What are the conflict issues?