Building a team of experts: addressing the crisis du jour by appointing a single-subject expert to the board can be a misguided tactic.

• Author: Raymond, Doug
• Position: LEGAL BRIEF

The Cybersecurity Disclosure Act of 2015, which recently was introduced in the U.S. Senate, will,--if adopted, require public companies to disclose whether any of their directors have expertise in cybersecurity. If board members do not have such experience, the company would be required to describe what cybersecurity steps had been taken. The bill would also require the SEC to identify the qualifications of a cybersecurity expert. While this legislation would not mandate that public companies add cybersecurity experts to their boards, this is apparently the bill's objective.

As even the most casual observer has noticed, cybersecurity and data privacy are indeed critical issues for most businesses and deserve significant attention and resources. Directors certainly have a crucial role to play in evaluating and reviewing the company's response to these and other risks, and ultimately, the board is responsible for how the company is managed. These concerns should be front and center in any risk management assessment made by a board, especially for a business that tracks consumer information. However, risk management is only one of the functions of the board of directors. And addressing the crisis du jour does not always require the appointment of a new director. In general, boards should annually undertake a complete assessment of their strengths and weaknesses and take a hard look at what skills they most need to strengthen their board and corporate governance. For most companies, the starting place is not to look for a subject-matter expert, but instead to focus on building a board with broad and deep experience in the company's specific industries and markets.

For most boards, their most important role is, absent a crisis or significant transitional situations (e.g., a sale of the company or replacement of the CEO), to set and periodically assess the strategic direction of the company. This includes long-term strategic planning based on the opportunities, risks, and threats faced by the company. In doing so, directors necessarily monitor and oversee the success of the company and its management in carrying out the strategy. Recent scholarship bears out the intuition that significant industry experience in the boardroom can enhance longterm value and strategic response. This is because directors with industry expertise typically have a deeper understanding of the risks and opportunities faced by the business. This allows directors to...