Recusal

In situations where a board member of The Board is also an owner or significant shareholder of a company being considered for acquisition, recusal rules are an essential measure to prevent conflicts of interest and maintain the integrity of the acquisition process. Here are suggested guidelines for recusal:

Mandatory Recusal

If a board member has any level of ownership or financial interest in a company up for acquisition by The Board, they should be required to recuse themselves from any discussions, deliberations, or votes related to that particular acquisition.

Ownership Threshold for Recusal

Establishing a clear threshold for recusal can be challenging as even a small stake in a company could influence a board member's judgment. However, a common standard is to set a specific percentage of ownership (for instance, 1% or 5%) or any interest that affords substantive influence or control over the company as the threshold triggering recusal.

Disclosure Requirements

Board members should disclose all financial interests in companies within The Board's purview at the time of their election or appointment and update this information regularly. Transparency is paramount to address any potential conflicts proactively.

Independent Verification

An independent ethics committee or compliance officer should periodically verify disclosures and identify conflicts, triggering recusal as necessary.

Non-Voting Participation

In some instances, a board member with industry expertise may still provide valuable, non-biased insights into an acquisition without participating in the voting process. Clear guidelines should determine when non-voting participation is permissible and must be stringently monitored.

Substitute Decision-makers

In cases where a member's recusal could impact the board's ability to make an informed decision, processes should be in place to allow for alternate expertise or temporary non-voting advisors to provide necessary information without having a stake in the outcome.

There should be clear legal consequences for failing to recuse oneself when there's a direct financial interest, ranging from censure to removal from The Board and potential legal prosecution.

By implementing and enforcing strict recusal policies, The Board can ensure its acquisition decisions are made impartially and in the best interest of competitive markets and public trust.