Key Points

• Watchdog groups that have no direct stake in companies are increasingly raising concerns directly to boards about critical issues like safety, ethics or compliance.
• Ignoring such communications can create risks for the company and its directors.
• Boards should respond with the same care as they would to whistleblower complaints or shareholder demands, which means understanding the issues and assessing their seriousness.
• Documenting the board’s response and reasoning is vital so the board can show that it acted in good faith and with due care if the company or board’s response is challenged later.

Directors of public companies are no strangers to scrutiny. Shareholders, whistleblowers, analysts, activists, unions, reporters, influencers, consumers, investigators, legislators and regulators all routinely question board decisions and corporate conduct. Add “watchdogs” to that list — organizations or individuals who, without a direct stake in the company, demand board action on issues they believe are critical.

When a watchdog group raises concerns or makes demands, directors must respond thoughtfully and diligently. As a board confronts such concerns, the directors’ mindset is important. Directors should be open to consider inputs from all sources that lead to a more thoughtful review and better outcomes. Proper handling not only fulfills their oversight responsibilities but also benefits the company and creates a defensible record of informed, good faith action. An appropriate response to watchdogs will often mirror a board’s approach to whistleblower complaints or shareholder demands. In every case, directors should ensure they are acting with diligence and care, reflecting a thoughtful process and sound business judgment.

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