“Three my keep a secret, if two of them are dead.” – Ben Franklin
Much has been written about boardroom confidentiality in both the public and private sectors, but not specifically for private clubs. Confidentiality may not be one of the legal duties of private club board members however it is typically listed along with the three primary legal fiduciary responsibilities in the modern Board Policy Manuals; they being:
- Duty of Care (acting in an informed and prudent manner)
- Duty of Loyalty (acting in the best interest of the club, over your own)
- Duty of Obedience (acting in compliance with the bylaws and legal requirements)
- DUTY OF CONFIDENTIALITY (respecting confidentiality and privilege information)
One might make the case that maintaining confidentiality is keeping the board’s secrets and akin to acting in the best interest of the club, over your own interests.
As a board member or leader of a private club you may be exposed to and informed of a wide range of confidential and or privileged information that could prove harmful or embarrassing to your members, guests, staff or the club itself if it were to become public. As trusted leaders of the club, directors regularly hear of issues between members, complaints about staff or member behavior and a host of somewhat personal and confidential situations. Board members are also confronted with more serious issues such as harassment or whistle blower complaints, conflicts of interest and formal complaints about member behavior.
Best governance practices dictate that a confidentiality policy statement should be part of your governance documents, to be reviewed and signed as part of the new board member orientation and by the entire board at least annually. It should contain what the penalties could be for a breach of this duty as fear of harsh discipline or censure is a meaningful deterrent. The board should also look for the circumstances and processes that often lead to a breakdown in confidentiality. The larger the board , the more susceptible it is to leaks of confidential information. A 2017 study by Professor Michael Slepian of the Columbia Business School reported that the likelihood of a leak of confidential information is a function of the number of individuals who have the information and the length of time since they first learned of it. In 2017 the Journal of Personality and Social Psychology reported that the average person has 13 secrets in their head at any given time and that only five of them will they truly keep secret. They postulate that a secret creates a psychological burden on the mind that can weigh heavily on the individual. Sharing helps relieve some of that burden. A UK survey in 2014 reported that men are bigger gossipers than women. According to their findings, a woman averages 3.5 hours before passing a secret along while one in ten men will blab a secret within minutes of first learning of it. Half admit they eventually will share the secret. Apparently, social media has exacerbated this problem.
Aside from peoples’ apparent propensity to share confidential information, clubs have unique circumstances that appear to worsen the problem. As previously mentioned, the size of the Board might have a bearing on the likelihood of a leak, but do some of your board practices increase it as well? For example, does your board allow waitstaff to serve the board during confidential discussions or do you have invited guests present during those times? Are your written minutes of the discussions too detailed and available to staff or members? Do you distribute confidential documents in advance of the meeting and allow directors to take them with them? Do your directors adjourn to the club table for lunch, to the bar, lounge or golf course continuing the discussion within earshot of other members, service staff, caddies or friends? It is surprising how often well intended board members will inadvertently discuss board matters outside of the board room. Situations such as these need to be discussed and corrected.
Once again, the smaller the number involved, the more secure the information will remain. Many club bylaws stipulate that the executive committee handles all serious member discipline issues and is the hearing committee for member issues. Whistle blowers and member harassment issues are referred to the president who maintains their confidentiality. Only generalities are discussed openly with the board unless serious discipline is to be recommended.
This is not to conflate confidentiality with lack of transparency as most responsible board members would likely agree that keeping confidential information on a need to know basis is in the best interest of the affected parties and often times the club itself.
Bob James, CCM, CCE, CHE, is vice president, DENEHY Club Thinking Partners, a full-service executive search and management consulting firm serving the private club and boutique resort industries at more than 300 clubs and resorts on more than 700 projects. He can be reached at [email protected] or 203-318-8228. Learn more at denehyctp.com.