January 13, 2026 • 37 mins
Rob Gerberry, Senior Vice President and Chief Legal Officer, Summa Health, speaks with Michael Peregrine about the most significant governance developments for the health care industry in 2025 and projections on the governance trends that will impact the health care industry in 2026.
Watch this episode: https://www.youtube.com/watch?v=qb_p7E3Brqg
Essential Legal Updates, Now in Audio
AHLA's popular Health Law Daily email newsletter is now a daily podcast, exclusively for AHLA Comprehensive members. Get all your health law news from the major media outlets on this podcast! To subscribe and add this private podcast feed to your podcast app, go to americanhealthlaw.org/dailypodcast.
Stay At the Forefront of Health Legal Education
Learn more about AHLA and the educational resources available to the health law community at https://www.americanhealthlaw.org/.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:04):
This episode of AHLA Speaking of Health Law is
brought to you by AHLA membersand donors like you.
For more information, visitAmericanHealthlaw.org.
SPEAKER_01 (00:17):
Hello, everyone.
This is Rob Gerberry.
I'm the Chief Legal Officer ofSUMA Health and the
President-elect Designate of theAHLA.
I'd like to welcome you to thelatest in our continuing series
of podcasts on corporategovernance issues affecting
healthcare organizations.
Today's episode is our annualyear-end presentation, where we
review the most significantgovernance developments for our
industry in 2025, and we offerour projections on the
(00:39):
governance trends we thinkthey'll impact our industry the
most in 2026.
Retrospective reviews can oftenbe a resource from which board
and executive leadership can bereminded of some of the more
important governance takeawaysof the just concluded year.
Trend projections can simply bea resource from which the board
and executive leadership canorient their governance
(01:02):
training, education, and agendafor the coming year.
As leading governance advisor tothe board, the general counsel,
likely teaming with the chiefgovernance officer, is well
situated to assist the boardwith both its retrospective
review and prospectiveconsideration of governance
trends and developments.
As always, for our podcasttoday, I'm joined by our HLA
(01:23):
colleague, my friend MichaelPerrin, who is both an HLA
fellow and a fellow of theAmerican College of Governance
Council.
Michael, I can't think of abetter way to say happy holidays
to our HLA membership and acouple of top 10 reviews of
what's happened and what we seecoming up in the upcoming year
related to corporate governance.
SPEAKER_02 (01:40):
That's right, Rob.
And I hope our viewers willappreciate my special
Christmas-oriented bow tietoday.
Santa Claus Red and WinstonChurchill polka dots.
Trying to keep in the spirit ofthings.
SPEAKER_01 (01:51):
And Michael, that's on brand for you.
You're known as a free spiritand living on the edge.
I've been distracted a lotlately, though, trying to guess
your number one 2025 corporategovernance development.
I did not get the top 12 teamsright in the college football
playoff.
Let's see if I got this right.
SPEAKER_02 (02:05):
Well, we start with Notre Dame and whether it should
be kicked out of the NCAA, but Idigress.
I think the question of uh justuh uh uh drinking from a fire
(02:26):
hose has been a huge issue, andit's got to be considered in
three elements that we start offwith in terms of looking back at
2025.
I think the first element is howthe year's extraordinary
volatility from what political,economic, regulatory, global,
and social perspectives, I thinkhas really worked to suggest
(02:47):
whether corporate officers anddirectors in this volatility
have heightened expectations oftheir fiduciary duties,
especially at oversight.
Uh and especially whenvolatility threatens the
stability of the organization'sbusiness or creates
unpredictable or hostileclimates for operations.
So I think that's number one.
The ongoing question (03:09):
do board members owe a higher sense of
care and loyalty in a volatileenvironment.
SPEAKER_01 (03:18):
And we certainly have seen that volatile
environment play out extensivelyin the healthcare sector this
year.
SPEAKER_02 (03:24):
Oh, that's right.
And that's why it ties directlyinto the second development,
which I think relates to theneed for boards to review and
better manage the scope ofinformation they receive.
The amount of information nowneeded to brief board members, I
think threatens to overwhelmtheir capacity for preparedness.
And that creates a real threatto effective governance.
(03:44):
So I think there's a need toexplore changes in how
information is identified,formatted, edited, and made
available at the timing ofdelivery.
SPEAKER_01 (03:56):
So, Michael, what's the third development from that
volatility concern?
SPEAKER_02 (04:00):
Well, and unsurprisingly, I think it's the
rise of director fatigue, whichis a problem that just has to be
addressed.
2025 gave us so many signs, Rob,that board members are just
becoming exhausted by theirfiduciary workload.
It's a fatigue that can be thebyproduct of service on multiple
boards, complex board agendas,certainly greater third-party
(04:21):
scrutiny, and dealing withconstant change, as we've
discussed in our podcasts, goingback to the you know, the
executive orders of January,February.
But the need for crediblesolutions is acute.
Board members are just gettingworn out, and that just is not a
recipe for good governance.
SPEAKER_01 (04:40):
Michael, what about the developments that relate to
board members' personalcommitment?
SPEAKER_02 (04:44):
Well, you're talking around about the whole
engagement issue, and I thinkyou're right that it was a major
2025 development.
During the year, we saw seriousconcerns arise about what is the
appropriate commitment expectedfrom a corporate director.
Does he or she have the time todo the job given all the
external distractions likeduties they owe to their own
(05:04):
employer, to other boards, andto personal interests?
Do they have the time to committo what is necessary to be an
effective board member?
And what you see is that it'sprompted two things.
One, uh, we're getting more uhhealthcare boards uh adopt a
policy on outside board service,which is an old Sarbanes theme,
(05:25):
but it's still important.
And we're also seeing some uhforward-thinking boards uh uh
adopt what uh what they call adirector commitment policy,
which is essentially aconfirmation of this is what we
expect for you in terms ofenergy, time, and commitment and
re- and preparation.
That can rub some people thewrong way, but it underscores
the issue.
(05:46):
We need your we need the best ofyour time and energy if you're
gonna be our board member.
SPEAKER_01 (05:50):
So, Michael, this year we spent quite a bit of
time talking in our podcastabout AI-related issues.
I got Notre Dame wrong, but I'msure that's got to be in our top
10, right?
SPEAKER_02 (05:59):
Absolutely.
And uh two of these immediatelycome to mind, and we've talked
about them a little bit in someof our more recent podcasts.
Uh the first is the extent towhich boards are giving more
serious consideration to theirAI duties, both oversight and
structure, uh, that by whichthey exercise those duties.
And I think that's been promptedby uh the NACD report uh that
(06:22):
came out late last year,technology in the boardroom.
It was the first indication, Ithink the first substantive
indication from a majorrespective thought leadership
organization that yes, the boardhas a responsibility to monitor
the deployment of AI in theorganization.
Um and again, we've been seeingthat in terms of I think a
(06:44):
substantial development thisyear where boards are saying we
need to define our role, we needto exercise our role, we need to
pursue our role in this regardbefore it gets too late, before
we lose control of the wholedeployment issue.
SPEAKER_01 (06:56):
Michael, you said two developments.
What would be the second one?
SPEAKER_02 (06:59):
Well, I think pretty clearly it's the emerging
perspective, Rob, that theboard, in its human capital
role, has a responsibility toaddress the workforce
displacement issues that mightarise from the deployment of AI
and related technology.
You know, we're we're startingto see quite a bit of rumblings
about this from the workforcesurveys.
(07:20):
I read an editorial in the WallStreet Journal today that talked
about this as well.
Um, boards cannot just sit byand allow um AI decisions and
AI-related expense lineefficiencies to proceed at any
cost.
Uh there is a fiduciary and dareI say, a moral obligation that's
(07:41):
arising to say, at least what'sgoing on here?
Are these efficienciesnecessary?
What's the impact on ourworkforce?
What and on both on culture andthe jobs that they have right
now?
SPEAKER_01 (07:55):
Mike, it always seems like in our daily
briefings we're hearing thatconstant beat of executive suite
turnover, especially in the CEOuh office.
Does your top 10 issues reflectthat?
SPEAKER_02 (08:04):
Well, it sure does, absolutely.
You know, I'm like you.
The data I read suggests thatthere's constant CEO turnover,
uh, whether voluntary orinvoluntary, and it's not just
in college football.
Um the the concept is that thisCEO tenure is declining
markedly.
It's not really whether they getpaid for that or not, it's the
fact that oftentimes they'remuch more short-termers than
(08:26):
we're used to seeing, certainlythat you and I grew up in the
industry with.
So I think a major 2025development involves the need
for boards to be more alert tothe stability of the CEO office.
And by that I mean, how are youdoing, Rob?
Uh how are things coming along?
How's the pressure?
Are you are you able to um uh uhenjoy coming to work?
(08:46):
Are you comfortable with thisposition?
What's the pressure like on you,um as well as how they're
performing?
And but at the same time, tohave what I call ready-to-go
executive search and successionpractices, including uh but not
limited to emergency successionplans.
Uh I don't I'm not sure that'shappening fast enough, Rob.
(09:08):
I'm I'm surprised at theboardrooms I've been in where
there's just where successionplans aren't really in place or
or haven't been have been on theshelf way too long.
And I think it's almost an easyfix.
This is something the boards canimmediately jump in on.
And I've seen some of my umreally most effective uh uh
board clients are those that notonly look at it at the CEO
(09:31):
level, but also at the boardlevel succession at the board
level and succession at seniorexecutive officer level.
So I think it's been a veryimportant development this year.
SPEAKER_01 (09:42):
So, Michael, what about the developments related
to board composition as we thinkabout the skill sets that are
necessary in 2026 to effectivelygovern?
SPEAKER_02 (09:50):
Well, I think you you're always going to have,
Rob, the debate about well,should we have a
competency-based board or astrategic vision-based board?
And I'm I'm not sure that's amajor development this year, but
I do think that there have beenthree concepts uh uh that that
are within the broaderdevelopment relating to board
composition.
Uh, number one, it at least inmy experience, we're I'm seeing
(10:11):
a significant increase in theuse of off boarding to uh excuse
ineffective board members fromfuture service.
In other words, it's a gentler,kinder, more respectful way to
say your history to that boardmember who's clearly not
performing or clearlyuncomfortable from this
position.
Um second, is that you know,while term limits and retirement
(10:35):
requirements are are popular,they're not quite best practice
in and of themselves.
But I think there's anincreasing recognition that that
they're tools to be used inconjunction with a variety of uh
refreshment techniques thatgenerate turnover that's
balanced with the retention ofexpertise.
Um but it's not again, they'renot in and of themselves the
(10:58):
most effective way to address uhturnover.
And the third um element of thisparticular development is uh you
know, for obvious reasons, thedirector's nomination process
really needs to be focused onselecting the best possible
candidates and avoidingmeasurements like quotas,
(11:18):
mandates, preferences, andpercentages for reasons that we
have been living with,obviously, for the entire year.
Uh, and it's an area where thegeneral counsel can be
particularly helpful, makingsure that the nomination matrix
for the board is uh cleansed ofreferences or tools or uh uh
(11:40):
relationship points that wouldsuggest the type of standards
that the federal governmentmight not appreciate.
SPEAKER_01 (11:48):
So, Michael, is there any recent pronouncements
or regulatory guidance thatreminds us we can't forget about
the importance of corporatecompliance in the boardroom?
SPEAKER_02 (11:55):
You know, I've always been worried, Rob, that
you know, some people feel thatcorporate compliance, which is
now what 25 years old is a majorconcept, has has had its 15
minutes of fame.
Uh clearly, if you uh listen tosome of the more recent speeches
from uh the Deputy AttorneyGeneral and the other Department
of Justice officials, they'regonna disagree with that
analysis.
(12:16):
Um while a lot of law firm memosuh earlier this year uh talked
about a significant shift uhaway uh from Biden
administration sponsoredcorporate fraud enforcement
initiatives.
Um, I think the Department ofJustice is of the view that is
that individual accountabilityand healthcare fraud remain key,
(12:37):
if not primary, enforcementobjectives.
So I think the message is umdon't make the mistake of toning
down your compliance emphasisbecause you will be surprised
that the Department of Justicefeels that they are as strong or
stronger on concepts ofindividual accountability and
(12:57):
pursuing healthcare fraud.
SPEAKER_01 (13:00):
So, how did we get here so quick, Michael?
We're down to the lastdevelopment.
It's time for the unveil.
What is number 10?
SPEAKER_02 (13:06):
Well, I think that's gonna be one on culture-related
matters, or something probably Iwouldn't have suspected uh a
year ago.
Uh, but there are very uhseveral aspects of board and
corporate culture that I thinkhave coalesced to to become a
major issue in the past yearfrom a governance perspective.
(13:26):
One has to be the sharp increasein attention to intraboard
collegiality and how it canimpact board effectiveness.
Um, I think that there's simplya rising intolerance, and there
should be, for you know, whatare you gonna call the bad
actors for adversarial anddisrespectful boardroom
(13:46):
dynamics?
A much greater appreciation whenyou have that disruptive
director in the room and justgenerally a pain in the ass, or
is rude or or is you know, withwith by body language, is
chilling other board membersfrom participating in the
conversation.
I think there's a greaterrecognition that that kind of uh
(14:09):
uh ill uh uncollegial,uncollegial, what's the right
word, conduct, uh is going toaffect negatively the boardroom
discourse, and that's a problem.
So that's number one, people arepaying attention to that.
The other is something we'vetalked about in one of our uh
podcasts earlier this year, andthat's the emphasis on director
candor.
(14:29):
Uh it's you know, it's notnecessarily transparency, but
it's more you have an obligationto share with your other board
members information that youbelieve is necessary for the
performance of their duties.
And there was a major court casein this regard as well, uh which
resulted, you may remember, inthe shaming of a director by a
court, which is a highly unusualsituation.
(14:51):
You just can't pull punches withyour other board members.
You have to be upfront andtransparent in your
communication with them.
It's part of the duty ofloyalty.
You've got to have your cards onthe table so everybody has the
same information that you'reworking from.
And I think that's another,again, cultural development
that's critical as a majordevelopment from this year.
SPEAKER_01 (15:15):
So, Michael, as we get ready for that ball to drop
and uh we move into 2026, let'sask you to put on your Karnak,
the magnificent costume, andshare with our listeners your
wisdom on what you think will bethe top trends for 2026.
All right, so let's start withnumber one.
SPEAKER_02 (15:29):
Well, Rob, but let me throw you a curveball and say
it's trust and reputation.
I think that's going to be thethat would be the number one
trend, trust and reputation ofthe organization with respect to
its constituents.
I think we're gonna be seeingmore surveys that suggest the
public is losing confidence inmajor corporations and
institutions.
(15:50):
We started the year with theEdelman Trust Barometer, which
they do every year, and and Ithink it's outstanding, and they
zeroed in on the GrievanceSociety, and darned if they
weren't dead on uh I was gonnasay the other word from my
cousin Benny, they that theywere absolutely correct in their
analysis.
Now we see at the end of theyear the new Harvard Kennedy
(16:13):
School study on uh Gen Z andtheir uh issues, and it again
it's a question of elements ofsociety losing faith in
institutions and corporations.
And what does I think agoverning board in any sector,
certainly healthcare, that dealsso directly with the public and
(16:33):
on many levels, has to be awareof this.
How are how do we need to dealwith our constituents?
Um, it's a foundational issue,and boards I think need to be
really alert to thisdevelopment.
SPEAKER_01 (16:46):
A really important issue.
So on the topic of volatility,can we take an exhale?
Will this be a calmer yearahead?
SPEAKER_02 (16:53):
I don't not necessarily.
I I don't think there's a chancethat volatility moves off the
table um this year because it'san election year, if anything
else.
And and without trying to bepolitical in any way, uh, boards
should not expect to catch abreath when it comes to
volatility as to again the thethe lineup, government affairs,
global developments, the globalsupply chain, the economy,
(17:17):
social concerns, and politicaldevelopments.
Would it be the case that wewould have a columnar year?
But I don't think that I don'tknow anybody, and I haven't read
anybody who expects 2026 to betranquil.
And I think the key thing isfrom a board perspective, Rob,
that we know from experiencethat public turmoil, turbulence,
and controversy will find theirway in some uh element onto the
(17:41):
board agenda.
So I think the question is ifwe're talking about uh how much
engagement board members shouldhave be uh in 2026, I think the
volatility question will answercertainly no less than they had
last year.
SPEAKER_01 (17:55):
So during our period of reflection on 2025 issues, we
talked about board membersdrinking from a fire hose.
What do you expect to be comingout of that fire hose in 2026
that board members should beready for?
SPEAKER_02 (18:06):
Two related thoughts.
And and one might be might seema little odd, but I think we're
already seeing signs of it now.
And that is that there will bedevelopments in the public
health sector, I think, uh thatboards are going to be called
upon to address issues that theydidn't anticipate addressing,
(18:26):
issues that they don'tnecessarily want to be called
into to addressing.
Uh the whole vaccinationquestion is one of them.
Uh the decisions uh regardingthe uh the hepatitis vaccine is
is, I think, the tip of theiceberg in terms of the kinds of
issues uh where there'sconfusion about the appropriate
(18:48):
public health response, whichwill arise not only in
consumers, but in medical staffmembers.
And ultimately it the board willneed to be prepared to support
management in deciding how wehow much of this is a concern,
how much of it is a liabilityexposure, how much is it a PR
(19:09):
issue for us, how much is it astaff relations issue.
I just think that that's goingto be a big issue that people
aren't seeing coming.
Um it's just it's part of thatwhole category of issues, Rob,
that I think board members aregoing to say, you know, I didn't
sign up for this.
I I, you know, I don't reallywant to deal with this.
And the problem is you're inthat seat, you have to deal with
(19:32):
it.
Um then there's a related trend,uh, which is the need for board
and executive leadership to bemuch more aggressive on director
retention efforts.
We've spent a lot of time overthe last couple of years talking
about how uh removal, how to getrid of the problematic board
member.
I think we're gonna see a shiftnow to saying how can we keep
good board members if they haveother options, if they're just
(19:55):
tired of it.
I think the the potential braindrain from the boardroom is
something we really have.
Be concerned about.
SPEAKER_01 (20:02):
So, Michael, thinking about intra board
matters, any other issues thatyou've seen that you would
forecast for the year ahead?
SPEAKER_02 (20:08):
Yeah, I do.
I think that uh what what I'mkind of projecting uh uh is a
byproduct of the expanding, youknow, expanding board portfolio
that I've been talking about.
And and I think there's going tobe an increased emphasis on
really meaningful board andindividual director evaluation
processes.
And that I mean by that meanreally serious grading.
(20:31):
My sense is boards are having anincreasing intolerance for not
only disruptive directors, butunderperforming directors and
disengaged directors, um, aswell as those who are disruptive
and uncollegial.
I think board members aresaying, look, if I'm going to
assume all these additionalresponsibilities, if this is
becoming a more challenging andstressful job for me, I'm not
(20:54):
going to sit around and haveMichael and Rob dozing off in
board meetings, not beingprepared, not thinking things
through.
If uh it's the risk on me is toogreat if we've got certain
numbers of board members uh whojust aren't up to the task.
And I think you'll find that asin the past, some of the uh
consulting firm surveys thatwill come out in the beginning
(21:16):
of the year will say the samething, which is CEOs want to
replace a large number of boardmembers.
So the the best way to do thatfrom a variety of perspectives
is to have strong indicationsfrom really well-prepared
evaluation processes to say thedata all shows and your peers
all show that you're not doingthe job.
See you, goodbye.
(21:36):
So I think that's going to be abig, a big issue uh in 2026.
SPEAKER_01 (21:41):
Michael, as you know, since COVID we've had some
shifting dynamics around thelogistics of conducting board
meetings and just how weposition board members to
effectively get together andgovern.
What do you see happening inthat space?
SPEAKER_02 (21:53):
Well, I think there are a couple things that I see
part of a of a trend in 2026.
First, from a generalperspective, uh it'll be kind of
like the return to work uhpressures that we're seeing now
in the general business worldand certainly within law firms.
I I think we can see muchgreater emphasis on um in-person
time in the boardroom that thatthe and the effective use of
(22:16):
that time.
And by the effective use of thattime, Rob, I mean um better
agenda control, uh tighterissues.
Uh, you and I have talked aboutthis in the past.
That is not to suggest that uhthat I'm endorsing um uh uh a
broad-based consent agendabecause I think that's a real
dangerous process.
(22:37):
But it is the concept of the CEOand the general counsel and the
chair working together to have aboard agenda that's focused on
the truly important issues, thestrategic issues, and less the
tactical issues to make surethat we're getting the most bang
for the buck in board meetings.
(22:57):
I uh at the same time, um, I'mnot trying to dismiss the value
of remote board activity.
The question is, let's take alook and see if that really
works.
How is there any is there anysuggestion that those meetings
are less effective?
They can be, you know, it wouldwhen properly structured, they
can be extremely effective.
But as you and I both know,there's really no substitute for
(23:19):
people actually being around theboardroom together, watching
their uh body language, lookingat their expressions, getting a
sense.
Um, and I do think just as we'reseeing the shift back to the
office in terms of uhwhite-collar work, I think that
there needs to be a shift backto the boardroom, in-person
meetings, but with the conceptthat they're effectively
(23:42):
maintained.
We're not going to waste yourtime.
We're going to keep a tight ropeon the agenda, and we're not
going to allow filibustering byboard members and things of that
nature.
Uh the second related uhdevelopment, Rob, is that I
think uh, as I kind of mentioneduh a few minutes ago, boards are
going to be encouraged to refinethe flow of information uh to
(24:03):
them in order to make it moremake them more effective and
more responsive to current boardissues.
And by that I mean um are wegetting the kind of information
we need to tackle the bigissues?
Um two issues that I've beentalking about this week with my
clients.
Uh one is the uh MIT uh uhstudy, the iceberg project
(24:28):
study, which uh talks about umthe both the pre the the obvious
and the hidden uh workforcecosts of AI deployment.
And it's it's it's a computersimulation that's designed to
help uh organizations plan foruh what may be uh appropriate or
what may be inappropriateworkforce displacement in the
(24:50):
application of AI.
It's an interesting study, andit's going to be important from
a strategy perspective.
It's an example of the kind ofthings boards need to have in
front of them.
The same way with the uh HarborKennedy study.
Uh, we need to ask ourselves,and I think this is a question
of the general counsel, thecorporate secretary, the board
chair working together, what'sthe kind of information we do?
(25:11):
We don't want to just do aninformation dump, but what are
the kinds of things that youthink you will really need and
as a board member uh goingforward?
But that does really help uhdepend on having other people
like the general counsel uh andthe CEO say, given what we see
coming, we think you needinformation here.
(25:32):
And it may mean pruning someinformation back that you're
used to getting.
Um the the third issue is umthat uh and this reflects a
personal prejudice, but theboard's going to need to
discipline itself to resistwell-intentioned, but
nevertheless, what I would callunstable or uh or um immature
(25:56):
proposals to use AI in supportof board activities.
Uh many consultants and manytech uh executives and other
well-meaning and extremelybright people are proposing all
sorts of great ways to use AI toum improve the conduct of the
board.
Uh, there was an even in astudy, Rob, that uh in Deal Book
(26:19):
in the Times a week or so agoabout the prospect of using AI
agents as board members in thefuture.
We just have to be, we just haveto be prudent about this.
We have to be careful and andnot jump on the bandwagon quite
yet uh before uh we we can trustuh the use of AI to replace uh
traditional board developmentpractices.
SPEAKER_01 (26:40):
So, Michael, it sounds like you're not a fan of
that greater role of AI.
Let me ask you a practicalquestion.
I keep getting asked.
How do you feel about AIbecoming our minute taker for
our board meetings andprivilege?
SPEAKER_02 (26:50):
You know, um I get to ask that question as well.
And uh I I frankly don't see thebenefit of it.
I uh you know, I I think it's acertainly uh I the uh is it
wrong?
Is it illegal?
Um no.
Um let me talk about it in apositive way.
I think that the concept ofhaving a corporate secretary,
(27:12):
the general counsel, theassistant general counsel taking
minutes uh is going to be farmore effective because that
person's gonna be able to readthe room, see the people,
understand what to emphasize andwhat not to emphasize.
Uh well-prepared minutes, and ofcourse we could maybe we should
spend some time on this uh in2026, one of our upcoming
(27:32):
podcasts.
What are minutes for?
They're for two reasons.
They want to remind the board ofit of its decisions and what's
on its agenda going forward, andit's to be able to demonstrate
the exercise of fiduciary dutyuh by the board members.
Uh and if you are unable to, ifyou are a machine and you are
unable to have a take the pulseof of the emphasis of
(27:55):
conversations or you are unableto know what's critically
important in an exercise of dutyand what's not, I got a problem
with that.
So um I I'm again how how isthis different than taking the
minutes by tape?
You know, I I know there's allthe question about what do you
do with the tape and is there anobstruction issue?
I I just think we got to wait alittle bit on this.
(28:16):
Um uh there's no substitute fora human taking stock of the
boardroom and the culture andthe climate of the boardroom and
reflecting that in minutes anddiscernment.
SPEAKER_01 (28:26):
I won't refer to you as get off my lawn guy with that
position.
I think that's an appropriatepause as we look to implement
some of these new initiatives.
So, Michael, uh thinking aboutcorporate compliance, will that
be less of a focus this year, orwhere do you see it falling on
our list of board priorities?
SPEAKER_02 (28:41):
Well, I I think it has to be a big priority, and
just picking up what we talkedabout as a as a 2020 to by 2020
development.
Uh I I think that we know nowfrom a speech from the Deputy
Attorney General that theDepartment of Justice will soon
be introducing a new what theycall single corporate
(29:01):
enforcement policy that appliesto criminal cases across the
Department of Justice.
And whether that uh means thatthey'll update the uh uh
compliance uh uh guidelines thatwe are used to seeing from the
Department of Justice, I don'tknow.
But in this that speech, theDeputy Attorney General
(29:22):
identified the core tenets ofwhat that uh uh policy will be,
and it uh and it will includeself-disclosure, cooperation,
ensuring individualaccountability, and applying an
evidence-based approach tocorporate enforcement to
individuals.
So I just think we make a hugemistake if we downplay this
(29:42):
administration's commitment touh white-collar uh uh corporate
fraud enforcement.
Um and uh I think even thoughthat we we may look for ways to
decrease the amount of time theboard spends on traditional
issues like compliance, I thinkyou're gonna see very early on
(30:02):
in 2026 reasons to do quite theopposite.
And so that that's something umuh that I would expect certainly
in the first quarter of 2026,and it will require a response
from the board.
SPEAKER_01 (30:15):
So, Michael, I have to keep going back to the well
on AI, but are you sure there'sno more AI spillover issues that
you want boards to think about?
SPEAKER_02 (30:21):
Well, you know, as we're taping this today, um uh
we've just seen a new executiveorder and the question of
federal preemption of state lawson artificial intelligence.
Again, I'm not making apolitical comment on that at
all.
What I am saying is that boardsneed to really be close and
monitor the evolution of stateand federal government policy on
(30:43):
AI regulation, uh, especially asit relates to whether it's
limited regulation, federalpreemption, some overarching
federal regulation, and what thestates are doing.
The reason is we don't havestandards right now promulgated
by any government per se on whatthe board should be looking at
(31:03):
in terms of monitoringAI-related risk that could
create some type of regulatoryproblem.
We're flying blind.
Um and uh I and I understand andappreciate the impact of keeping
regulation low to enhance um uhdevelopment and uh and uh
creativity and all, but boardswhen they're trying know that
(31:24):
they need to have a AI-specificcompliance function, but when
you don't have any maturestatutory scheme to address the
the known risks of AI, again,you're kind of making it up as
you go along.
Um, hopefully there will be in2026 some effort to articulate
(31:46):
that more in terms of publicpolicy so boards and management
will have a better understandingof what they should be focusing
on in terms of uh their workwith management on uh AI-related
risk.
But I don't think we're thereyet.
And I think it's going to be akey compliance concern to get
this resolved as soon aspossible.
SPEAKER_01 (32:07):
So maybe merging some concepts here, but Michael,
do you see any changes comingforward with the culture of
compliance?
SPEAKER_02 (32:13):
Yeah, I I I do, but less in terms of any new uh DOJ
policy and more in terms of uhwhat I think would be greater
board and executive leadershipcommitment to what we've called
tone at the top.
Um, you know, it's been uh it'sgonna be almost 25 years, Rob,
since uh we had the wholecorporate responsibility
(32:37):
movement uh and coming out ofthe Enron experience in
Sarbanes.
And and we've got generationalchanges in the executive and
board leadership room, and thereand and there's not a lot of
history with some of those folkswith the excesses that created
uh the scandals then.
And but I do think that I sensevery clearly that there is a
(33:00):
willingness in the board roomsto kind of go back and it's time
to re-energize uh tone at thetop, both at the board
management level.
Um part of this I think comesfrom a renewed awareness of the
organizational and individualcost that come with breaches of
(33:21):
ethics, breaches of integrity,and also a response to the
seeming normalization ofconflicts of interest.
In other words, I just it's asense that people are saying,
maybe it's time that we we paymore attention to traditional
principles of corporateresponsibility and leadership,
both walking the walk andtalking the top.
(33:43):
I that's that's my expectationfrom a culture of compliance
perspective uh in the comingyear.
SPEAKER_01 (33:49):
And how do you see all that affecting uh the
executive leadership team?
SPEAKER_02 (33:52):
Well, I think this is gonna be an absolute critical
trend going forward.
Uh we're talking a lot in thispodcast about uh greater duties
being foisted on the board, uh,maybe greater duties being
sought by the board and greateragenda issues and things of that
nature.
And you know what this is gonnado is gonna continue to put
(34:15):
pressure on the board managementdynamic and the question of what
is management's role and what isthe board's role.
That middle ground is gonnabecome much grayer.
Uh the National Association ofCorporate Directors in October
released their blue ribboncommission report for this year,
and it's all about building ahigh trust board CEO
(34:37):
relationship.
And what I believe in 2026, Rob,is that we're gonna see many
boards heeding in some way oranother NECD's recommendation to
make strengthening the boardmanagement relationship an
absolute imperative.
And so I just, you know, I justthink that's critical.
SPEAKER_01 (34:57):
So, Michael, we made a reference over to CarMac.
So Ed McMahon now has in my handthe last envelope.
What is our governance to say orsay is our last development or
thought for 2026?
SPEAKER_02 (35:07):
Well, I'll go back to the well on that one, Rob.
And again, I think it's a sensethat boards will at some point
recognize that they are going toneed to urgently up their game
on oversight of the company's AIdeployment.
Um, that it's going to be boardsare going to be prompted by a
sense that the pace of AIdeployment is rapidly outpacing
(35:28):
the current ability of the boardto monitor it as to use, as to
accountability, as to the impacton the workforce, and especially
as to trust and risk.
This is not a criticism of AI.
It's essentially a recognitionthat deployment in our industry
is going so rapidly and acrossso many fronts that the board's
(35:54):
ability to monitor, to keep afinger on the pulse of what's
going on, and to understandwhat's going on and to
understand the expectations isgoing to be jeopardized because,
again, it's we let's end wherewe started from.
It's drinking from the firehose.
And I think it's going to beimportant that the board at some
(36:14):
point come together and say isthe mechanism that we have
currently in place to monitorhow AI is acquired, deployed,
and monitored throughout theorganization, is it working?
What do we know?
And what how do we need to makeit better?
That's the one, you know, as Isaid, that I just can't get away
(36:35):
from that.
This something is going to be anoverwhelmingly important issue
in 2026.
SPEAKER_01 (36:41):
Well, Michael, thank you so much for wrapping up
2025, for forecasting 2026.
We appreciate all you've donefor our listeners this year.
We'll be back next month withour next governance podcast
discussion where we'll dig intothe latest developments around
the role and conduct of thegoverning board.
Michael, thank you very much.
SPEAKER_02 (36:58):
Thank you, Roman.
SPEAKER_00 (37:04):
If you enjoyed this episode, be sure to subscribe to
AHMLA Speaking of Health Lawwherever you get your podcasts.
For more information about AHLAand the educational resources
available to the health lawcommunity, visit
americanhealthlaw.org and stayupdated on breaking healthcare
industry news from the majormedia outlets with AHLA's Health
Law Daily Podcast, exclusivelyfor AHLA comprehensive members.
(37:27):
To subscribe and add thisprivate podcast feed to your
podcast now.
Go to americanhealthlaw.orgslash daily podcast.
This episode of AHLA Speaking of Health Law is
brought to you by AHLA membersand donors like you.
For more information, visitAmericanHealthlaw.org.
SPEAKER_01 (00:17):
Hello, everyone.
This is Rob Gerberry.
I'm the Chief Legal Officer ofSUMA Health and the
President-elect Designate of theAHLA.
I'd like to welcome you to thelatest in our continuing series
of podcasts on corporategovernance issues affecting
healthcare organizations.
Today's episode is our annualyear-end presentation, where we
review the most significantgovernance developments for our
industry in 2025, and we offerour projections on the
(00:39):
governance trends we thinkthey'll impact our industry the
most in 2026.
Retrospective reviews can oftenbe a resource from which board
and executive leadership can bereminded of some of the more
important governance takeawaysof the just concluded year.
Trend projections can simply bea resource from which the board
and executive leadership canorient their governance
(01:02):
training, education, and agendafor the coming year.
As leading governance advisor tothe board, the general counsel,
likely teaming with the chiefgovernance officer, is well
situated to assist the boardwith both its retrospective
review and prospectiveconsideration of governance
trends and developments.
As always, for our podcasttoday, I'm joined by our HLA
(01:23):
colleague, my friend MichaelPerrin, who is both an HLA
fellow and a fellow of theAmerican College of Governance
Council.
Michael, I can't think of abetter way to say happy holidays
to our HLA membership and acouple of top 10 reviews of
what's happened and what we seecoming up in the upcoming year
related to corporate governance.
SPEAKER_02 (01:40):
That's right, Rob.
And I hope our viewers willappreciate my special
Christmas-oriented bow tietoday.
Santa Claus Red and WinstonChurchill polka dots.
Trying to keep in the spirit ofthings.
SPEAKER_01 (01:51):
And Michael, that's on brand for you.
You're known as a free spiritand living on the edge.
I've been distracted a lotlately, though, trying to guess
your number one 2025 corporategovernance development.
I did not get the top 12 teamsright in the college football
playoff.
Let's see if I got this right.
SPEAKER_02 (02:05):
Well, we start with Notre Dame and whether it should
be kicked out of the NCAA, but Idigress.
I think the question of uh justuh uh uh drinking from a fire
(02:26):
hose has been a huge issue, andit's got to be considered in
three elements that we start offwith in terms of looking back at
2025.
I think the first element is howthe year's extraordinary
volatility from what political,economic, regulatory, global,
and social perspectives, I thinkhas really worked to suggest
(02:47):
whether corporate officers anddirectors in this volatility
have heightened expectations oftheir fiduciary duties,
especially at oversight.
Uh and especially whenvolatility threatens the
stability of the organization'sbusiness or creates
unpredictable or hostileclimates for operations.
So I think that's number one.
The ongoing question (03:09):
do board members owe a higher sense of
care and loyalty in a volatileenvironment.
SPEAKER_01 (03:18):
And we certainly have seen that volatile
environment play out extensivelyin the healthcare sector this
year.
SPEAKER_02 (03:24):
Oh, that's right.
And that's why it ties directlyinto the second development,
which I think relates to theneed for boards to review and
better manage the scope ofinformation they receive.
The amount of information nowneeded to brief board members, I
think threatens to overwhelmtheir capacity for preparedness.
And that creates a real threatto effective governance.
(03:44):
So I think there's a need toexplore changes in how
information is identified,formatted, edited, and made
available at the timing ofdelivery.
SPEAKER_01 (03:56):
So, Michael, what's the third development from that
volatility concern?
SPEAKER_02 (04:00):
Well, and unsurprisingly, I think it's the
rise of director fatigue, whichis a problem that just has to be
addressed.
2025 gave us so many signs, Rob,that board members are just
becoming exhausted by theirfiduciary workload.
It's a fatigue that can be thebyproduct of service on multiple
boards, complex board agendas,certainly greater third-party
(04:21):
scrutiny, and dealing withconstant change, as we've
discussed in our podcasts, goingback to the you know, the
executive orders of January,February.
But the need for crediblesolutions is acute.
Board members are just gettingworn out, and that just is not a
recipe for good governance.
SPEAKER_01 (04:40):
Michael, what about the developments that relate to
board members' personalcommitment?
SPEAKER_02 (04:44):
Well, you're talking around about the whole
engagement issue, and I thinkyou're right that it was a major
2025 development.
During the year, we saw seriousconcerns arise about what is the
appropriate commitment expectedfrom a corporate director.
Does he or she have the time todo the job given all the
external distractions likeduties they owe to their own
(05:04):
employer, to other boards, andto personal interests?
Do they have the time to committo what is necessary to be an
effective board member?
And what you see is that it'sprompted two things.
One, uh, we're getting more uhhealthcare boards uh adopt a
policy on outside board service,which is an old Sarbanes theme,
(05:25):
but it's still important.
And we're also seeing some uhforward-thinking boards uh uh
adopt what uh what they call adirector commitment policy,
which is essentially aconfirmation of this is what we
expect for you in terms ofenergy, time, and commitment and
re- and preparation.
That can rub some people thewrong way, but it underscores
the issue.
(05:46):
We need your we need the best ofyour time and energy if you're
gonna be our board member.
SPEAKER_01 (05:50):
So, Michael, this year we spent quite a bit of
time talking in our podcastabout AI-related issues.
I got Notre Dame wrong, but I'msure that's got to be in our top
10, right?
SPEAKER_02 (05:59):
Absolutely.
And uh two of these immediatelycome to mind, and we've talked
about them a little bit in someof our more recent podcasts.
Uh the first is the extent towhich boards are giving more
serious consideration to theirAI duties, both oversight and
structure, uh, that by whichthey exercise those duties.
And I think that's been promptedby uh the NACD report uh that
(06:22):
came out late last year,technology in the boardroom.
It was the first indication, Ithink the first substantive
indication from a majorrespective thought leadership
organization that yes, the boardhas a responsibility to monitor
the deployment of AI in theorganization.
Um and again, we've been seeingthat in terms of I think a
(06:44):
substantial development thisyear where boards are saying we
need to define our role, we needto exercise our role, we need to
pursue our role in this regardbefore it gets too late, before
we lose control of the wholedeployment issue.
SPEAKER_01 (06:56):
Michael, you said two developments.
What would be the second one?
SPEAKER_02 (06:59):
Well, I think pretty clearly it's the emerging
perspective, Rob, that theboard, in its human capital
role, has a responsibility toaddress the workforce
displacement issues that mightarise from the deployment of AI
and related technology.
You know, we're we're startingto see quite a bit of rumblings
about this from the workforcesurveys.
(07:20):
I read an editorial in the WallStreet Journal today that talked
about this as well.
Um, boards cannot just sit byand allow um AI decisions and
AI-related expense lineefficiencies to proceed at any
cost.
Uh there is a fiduciary and dareI say, a moral obligation that's
(07:41):
arising to say, at least what'sgoing on here?
Are these efficienciesnecessary?
What's the impact on ourworkforce?
What and on both on culture andthe jobs that they have right
now?
SPEAKER_01 (07:55):
Mike, it always seems like in our daily
briefings we're hearing thatconstant beat of executive suite
turnover, especially in the CEOuh office.
Does your top 10 issues reflectthat?
SPEAKER_02 (08:04):
Well, it sure does, absolutely.
You know, I'm like you.
The data I read suggests thatthere's constant CEO turnover,
uh, whether voluntary orinvoluntary, and it's not just
in college football.
Um the the concept is that thisCEO tenure is declining
markedly.
It's not really whether they getpaid for that or not, it's the
fact that oftentimes they'remuch more short-termers than
(08:26):
we're used to seeing, certainlythat you and I grew up in the
industry with.
So I think a major 2025development involves the need
for boards to be more alert tothe stability of the CEO office.
And by that I mean, how are youdoing, Rob?
Uh how are things coming along?
How's the pressure?
Are you are you able to um uh uhenjoy coming to work?
(08:46):
Are you comfortable with thisposition?
What's the pressure like on you,um as well as how they're
performing?
And but at the same time, tohave what I call ready-to-go
executive search and successionpractices, including uh but not
limited to emergency successionplans.
Uh I don't I'm not sure that'shappening fast enough, Rob.
(09:08):
I'm I'm surprised at theboardrooms I've been in where
there's just where successionplans aren't really in place or
or haven't been have been on theshelf way too long.
And I think it's almost an easyfix.
This is something the boards canimmediately jump in on.
And I've seen some of my umreally most effective uh uh
board clients are those that notonly look at it at the CEO
(09:31):
level, but also at the boardlevel succession at the board
level and succession at seniorexecutive officer level.
So I think it's been a veryimportant development this year.
SPEAKER_01 (09:42):
So, Michael, what about the developments related
to board composition as we thinkabout the skill sets that are
necessary in 2026 to effectivelygovern?
SPEAKER_02 (09:50):
Well, I think you you're always going to have,
Rob, the debate about well,should we have a
competency-based board or astrategic vision-based board?
And I'm I'm not sure that's amajor development this year, but
I do think that there have beenthree concepts uh uh that that
are within the broaderdevelopment relating to board
composition.
Uh, number one, it at least inmy experience, we're I'm seeing
(10:11):
a significant increase in theuse of off boarding to uh excuse
ineffective board members fromfuture service.
In other words, it's a gentler,kinder, more respectful way to
say your history to that boardmember who's clearly not
performing or clearlyuncomfortable from this
position.
Um second, is that you know,while term limits and retirement
(10:35):
requirements are are popular,they're not quite best practice
in and of themselves.
But I think there's anincreasing recognition that that
they're tools to be used inconjunction with a variety of uh
refreshment techniques thatgenerate turnover that's
balanced with the retention ofexpertise.
Um but it's not again, they'renot in and of themselves the
(10:58):
most effective way to address uhturnover.
And the third um element of thisparticular development is uh you
know, for obvious reasons, thedirector's nomination process
really needs to be focused onselecting the best possible
candidates and avoidingmeasurements like quotas,
(11:18):
mandates, preferences, andpercentages for reasons that we
have been living with,obviously, for the entire year.
Uh, and it's an area where thegeneral counsel can be
particularly helpful, makingsure that the nomination matrix
for the board is uh cleansed ofreferences or tools or uh uh
(11:40):
relationship points that wouldsuggest the type of standards
that the federal governmentmight not appreciate.
SPEAKER_01 (11:48):
So, Michael, is there any recent pronouncements
or regulatory guidance thatreminds us we can't forget about
the importance of corporatecompliance in the boardroom?
SPEAKER_02 (11:55):
You know, I've always been worried, Rob, that
you know, some people feel thatcorporate compliance, which is
now what 25 years old is a majorconcept, has has had its 15
minutes of fame.
Uh clearly, if you uh listen tosome of the more recent speeches
from uh the Deputy AttorneyGeneral and the other Department
of Justice officials, they'regonna disagree with that
analysis.
(12:16):
Um while a lot of law firm memosuh earlier this year uh talked
about a significant shift uhaway uh from Biden
administration sponsoredcorporate fraud enforcement
initiatives.
Um, I think the Department ofJustice is of the view that is
that individual accountabilityand healthcare fraud remain key,
(12:37):
if not primary, enforcementobjectives.
So I think the message is umdon't make the mistake of toning
down your compliance emphasisbecause you will be surprised
that the Department of Justicefeels that they are as strong or
stronger on concepts ofindividual accountability and
(12:57):
pursuing healthcare fraud.
SPEAKER_01 (13:00):
So, how did we get here so quick, Michael?
We're down to the lastdevelopment.
It's time for the unveil.
What is number 10?
SPEAKER_02 (13:06):
Well, I think that's gonna be one on culture-related
matters, or something probably Iwouldn't have suspected uh a
year ago.
Uh, but there are very uhseveral aspects of board and
corporate culture that I thinkhave coalesced to to become a
major issue in the past yearfrom a governance perspective.
(13:26):
One has to be the sharp increasein attention to intraboard
collegiality and how it canimpact board effectiveness.
Um, I think that there's simplya rising intolerance, and there
should be, for you know, whatare you gonna call the bad
actors for adversarial anddisrespectful boardroom
(13:46):
dynamics?
A much greater appreciation whenyou have that disruptive
director in the room and justgenerally a pain in the ass, or
is rude or or is you know, withwith by body language, is
chilling other board membersfrom participating in the
conversation.
I think there's a greaterrecognition that that kind of uh
(14:09):
uh ill uh uncollegial,uncollegial, what's the right
word, conduct, uh is going toaffect negatively the boardroom
discourse, and that's a problem.
So that's number one, people arepaying attention to that.
The other is something we'vetalked about in one of our uh
podcasts earlier this year, andthat's the emphasis on director
candor.
(14:29):
Uh it's you know, it's notnecessarily transparency, but
it's more you have an obligationto share with your other board
members information that youbelieve is necessary for the
performance of their duties.
And there was a major court casein this regard as well, uh which
resulted, you may remember, inthe shaming of a director by a
court, which is a highly unusualsituation.
(14:51):
You just can't pull punches withyour other board members.
You have to be upfront andtransparent in your
communication with them.
It's part of the duty ofloyalty.
You've got to have your cards onthe table so everybody has the
same information that you'reworking from.
And I think that's another,again, cultural development
that's critical as a majordevelopment from this year.
SPEAKER_01 (15:15):
So, Michael, as we get ready for that ball to drop
and uh we move into 2026, let'sask you to put on your Karnak,
the magnificent costume, andshare with our listeners your
wisdom on what you think will bethe top trends for 2026.
All right, so let's start withnumber one.
SPEAKER_02 (15:29):
Well, Rob, but let me throw you a curveball and say
it's trust and reputation.
I think that's going to be thethat would be the number one
trend, trust and reputation ofthe organization with respect to
its constituents.
I think we're gonna be seeingmore surveys that suggest the
public is losing confidence inmajor corporations and
institutions.
(15:50):
We started the year with theEdelman Trust Barometer, which
they do every year, and and Ithink it's outstanding, and they
zeroed in on the GrievanceSociety, and darned if they
weren't dead on uh I was gonnasay the other word from my
cousin Benny, they that theywere absolutely correct in their
analysis.
Now we see at the end of theyear the new Harvard Kennedy
(16:13):
School study on uh Gen Z andtheir uh issues, and it again
it's a question of elements ofsociety losing faith in
institutions and corporations.
And what does I think agoverning board in any sector,
certainly healthcare, that dealsso directly with the public and
(16:33):
on many levels, has to be awareof this.
How are how do we need to dealwith our constituents?
Um, it's a foundational issue,and boards I think need to be
really alert to thisdevelopment.
SPEAKER_01 (16:46):
A really important issue.
So on the topic of volatility,can we take an exhale?
Will this be a calmer yearahead?
SPEAKER_02 (16:53):
I don't not necessarily.
I I don't think there's a chancethat volatility moves off the
table um this year because it'san election year, if anything
else.
And and without trying to bepolitical in any way, uh, boards
should not expect to catch abreath when it comes to
volatility as to again the thethe lineup, government affairs,
global developments, the globalsupply chain, the economy,
(17:17):
social concerns, and politicaldevelopments.
Would it be the case that wewould have a columnar year?
But I don't think that I don'tknow anybody, and I haven't read
anybody who expects 2026 to betranquil.
And I think the key thing isfrom a board perspective, Rob,
that we know from experiencethat public turmoil, turbulence,
and controversy will find theirway in some uh element onto the
(17:41):
board agenda.
So I think the question is ifwe're talking about uh how much
engagement board members shouldhave be uh in 2026, I think the
volatility question will answercertainly no less than they had
last year.
SPEAKER_01 (17:55):
So during our period of reflection on 2025 issues, we
talked about board membersdrinking from a fire hose.
What do you expect to be comingout of that fire hose in 2026
that board members should beready for?
SPEAKER_02 (18:06):
Two related thoughts.
And and one might be might seema little odd, but I think we're
already seeing signs of it now.
And that is that there will bedevelopments in the public
health sector, I think, uh thatboards are going to be called
upon to address issues that theydidn't anticipate addressing,
(18:26):
issues that they don'tnecessarily want to be called
into to addressing.
Uh the whole vaccinationquestion is one of them.
Uh the decisions uh regardingthe uh the hepatitis vaccine is
is, I think, the tip of theiceberg in terms of the kinds of
issues uh where there'sconfusion about the appropriate
(18:48):
public health response, whichwill arise not only in
consumers, but in medical staffmembers.
And ultimately it the board willneed to be prepared to support
management in deciding how wehow much of this is a concern,
how much of it is a liabilityexposure, how much is it a PR
(19:09):
issue for us, how much is it astaff relations issue.
I just think that that's goingto be a big issue that people
aren't seeing coming.
Um it's just it's part of thatwhole category of issues, Rob,
that I think board members aregoing to say, you know, I didn't
sign up for this.
I I, you know, I don't reallywant to deal with this.
And the problem is you're inthat seat, you have to deal with
(19:32):
it.
Um then there's a related trend,uh, which is the need for board
and executive leadership to bemuch more aggressive on director
retention efforts.
We've spent a lot of time overthe last couple of years talking
about how uh removal, how to getrid of the problematic board
member.
I think we're gonna see a shiftnow to saying how can we keep
good board members if they haveother options, if they're just
(19:55):
tired of it.
I think the the potential braindrain from the boardroom is
something we really have.
Be concerned about.
SPEAKER_01 (20:02):
So, Michael, thinking about intra board
matters, any other issues thatyou've seen that you would
forecast for the year ahead?
SPEAKER_02 (20:08):
Yeah, I do.
I think that uh what what I'mkind of projecting uh uh is a
byproduct of the expanding, youknow, expanding board portfolio
that I've been talking about.
And and I think there's going tobe an increased emphasis on
really meaningful board andindividual director evaluation
processes.
And that I mean by that meanreally serious grading.
(20:31):
My sense is boards are having anincreasing intolerance for not
only disruptive directors, butunderperforming directors and
disengaged directors, um, aswell as those who are disruptive
and uncollegial.
I think board members aresaying, look, if I'm going to
assume all these additionalresponsibilities, if this is
becoming a more challenging andstressful job for me, I'm not
(20:54):
going to sit around and haveMichael and Rob dozing off in
board meetings, not beingprepared, not thinking things
through.
If uh it's the risk on me is toogreat if we've got certain
numbers of board members uh whojust aren't up to the task.
And I think you'll find that asin the past, some of the uh
consulting firm surveys thatwill come out in the beginning
(21:16):
of the year will say the samething, which is CEOs want to
replace a large number of boardmembers.
So the the best way to do thatfrom a variety of perspectives
is to have strong indicationsfrom really well-prepared
evaluation processes to say thedata all shows and your peers
all show that you're not doingthe job.
See you, goodbye.
(21:36):
So I think that's going to be abig, a big issue uh in 2026.
SPEAKER_01 (21:41):
Michael, as you know, since COVID we've had some
shifting dynamics around thelogistics of conducting board
meetings and just how weposition board members to
effectively get together andgovern.
What do you see happening inthat space?
SPEAKER_02 (21:53):
Well, I think there are a couple things that I see
part of a of a trend in 2026.
First, from a generalperspective, uh it'll be kind of
like the return to work uhpressures that we're seeing now
in the general business worldand certainly within law firms.
I I think we can see muchgreater emphasis on um in-person
time in the boardroom that thatthe and the effective use of
(22:16):
that time.
And by the effective use of thattime, Rob, I mean um better
agenda control, uh tighterissues.
Uh, you and I have talked aboutthis in the past.
That is not to suggest that uhthat I'm endorsing um uh uh a
broad-based consent agendabecause I think that's a real
dangerous process.
(22:37):
But it is the concept of the CEOand the general counsel and the
chair working together to have aboard agenda that's focused on
the truly important issues, thestrategic issues, and less the
tactical issues to make surethat we're getting the most bang
for the buck in board meetings.
(22:57):
I uh at the same time, um, I'mnot trying to dismiss the value
of remote board activity.
The question is, let's take alook and see if that really
works.
How is there any is there anysuggestion that those meetings
are less effective?
They can be, you know, it wouldwhen properly structured, they
can be extremely effective.
But as you and I both know,there's really no substitute for
(23:19):
people actually being around theboardroom together, watching
their uh body language, lookingat their expressions, getting a
sense.
Um, and I do think just as we'reseeing the shift back to the
office in terms of uhwhite-collar work, I think that
there needs to be a shift backto the boardroom, in-person
meetings, but with the conceptthat they're effectively
(23:42):
maintained.
We're not going to waste yourtime.
We're going to keep a tight ropeon the agenda, and we're not
going to allow filibustering byboard members and things of that
nature.
Uh the second related uhdevelopment, Rob, is that I
think uh, as I kind of mentioneduh a few minutes ago, boards are
going to be encouraged to refinethe flow of information uh to
(24:03):
them in order to make it moremake them more effective and
more responsive to current boardissues.
And by that I mean um are wegetting the kind of information
we need to tackle the bigissues?
Um two issues that I've beentalking about this week with my
clients.
Uh one is the uh MIT uh uhstudy, the iceberg project
(24:28):
study, which uh talks about umthe both the pre the the obvious
and the hidden uh workforcecosts of AI deployment.
And it's it's it's a computersimulation that's designed to
help uh organizations plan foruh what may be uh appropriate or
what may be inappropriateworkforce displacement in the
(24:50):
application of AI.
It's an interesting study, andit's going to be important from
a strategy perspective.
It's an example of the kind ofthings boards need to have in
front of them.
The same way with the uh HarborKennedy study.
Uh, we need to ask ourselves,and I think this is a question
of the general counsel, thecorporate secretary, the board
chair working together, what'sthe kind of information we do?
(25:11):
We don't want to just do aninformation dump, but what are
the kinds of things that youthink you will really need and
as a board member uh goingforward?
But that does really help uhdepend on having other people
like the general counsel uh andthe CEO say, given what we see
coming, we think you needinformation here.
(25:32):
And it may mean pruning someinformation back that you're
used to getting.
Um the the third issue is umthat uh and this reflects a
personal prejudice, but theboard's going to need to
discipline itself to resistwell-intentioned, but
nevertheless, what I would callunstable or uh or um immature
(25:56):
proposals to use AI in supportof board activities.
Uh many consultants and manytech uh executives and other
well-meaning and extremelybright people are proposing all
sorts of great ways to use AI toum improve the conduct of the
board.
Uh, there was an even in astudy, Rob, that uh in Deal Book
(26:19):
in the Times a week or so agoabout the prospect of using AI
agents as board members in thefuture.
We just have to be, we just haveto be prudent about this.
We have to be careful and andnot jump on the bandwagon quite
yet uh before uh we we can trustuh the use of AI to replace uh
traditional board developmentpractices.
SPEAKER_01 (26:40):
So, Michael, it sounds like you're not a fan of
that greater role of AI.
Let me ask you a practicalquestion.
I keep getting asked.
How do you feel about AIbecoming our minute taker for
our board meetings andprivilege?
SPEAKER_02 (26:50):
You know, um I get to ask that question as well.
And uh I I frankly don't see thebenefit of it.
I uh you know, I I think it's acertainly uh I the uh is it
wrong?
Is it illegal?
Um no.
Um let me talk about it in apositive way.
I think that the concept ofhaving a corporate secretary,
(27:12):
the general counsel, theassistant general counsel taking
minutes uh is going to be farmore effective because that
person's gonna be able to readthe room, see the people,
understand what to emphasize andwhat not to emphasize.
Uh well-prepared minutes, and ofcourse we could maybe we should
spend some time on this uh in2026, one of our upcoming
(27:32):
podcasts.
What are minutes for?
They're for two reasons.
They want to remind the board ofit of its decisions and what's
on its agenda going forward, andit's to be able to demonstrate
the exercise of fiduciary dutyuh by the board members.
Uh and if you are unable to, ifyou are a machine and you are
unable to have a take the pulseof of the emphasis of
(27:55):
conversations or you are unableto know what's critically
important in an exercise of dutyand what's not, I got a problem
with that.
So um I I'm again how how isthis different than taking the
minutes by tape?
You know, I I know there's allthe question about what do you
do with the tape and is there anobstruction issue?
I I just think we got to wait alittle bit on this.
(28:16):
Um uh there's no substitute fora human taking stock of the
boardroom and the culture andthe climate of the boardroom and
reflecting that in minutes anddiscernment.
SPEAKER_01 (28:26):
I won't refer to you as get off my lawn guy with that
position.
I think that's an appropriatepause as we look to implement
some of these new initiatives.
So, Michael, uh thinking aboutcorporate compliance, will that
be less of a focus this year, orwhere do you see it falling on
our list of board priorities?
SPEAKER_02 (28:41):
Well, I I think it has to be a big priority, and
just picking up what we talkedabout as a as a 2020 to by 2020
development.
Uh I I think that we know nowfrom a speech from the Deputy
Attorney General that theDepartment of Justice will soon
be introducing a new what theycall single corporate
(29:01):
enforcement policy that appliesto criminal cases across the
Department of Justice.
And whether that uh means thatthey'll update the uh uh
compliance uh uh guidelines thatwe are used to seeing from the
Department of Justice, I don'tknow.
But in this that speech, theDeputy Attorney General
(29:22):
identified the core tenets ofwhat that uh uh policy will be,
and it uh and it will includeself-disclosure, cooperation,
ensuring individualaccountability, and applying an
evidence-based approach tocorporate enforcement to
individuals.
So I just think we make a hugemistake if we downplay this
(29:42):
administration's commitment touh white-collar uh uh corporate
fraud enforcement.
Um and uh I think even thoughthat we we may look for ways to
decrease the amount of time theboard spends on traditional
issues like compliance, I thinkyou're gonna see very early on
(30:02):
in 2026 reasons to do quite theopposite.
And so that that's something umuh that I would expect certainly
in the first quarter of 2026,and it will require a response
from the board.
SPEAKER_01 (30:15):
So, Michael, I have to keep going back to the well
on AI, but are you sure there'sno more AI spillover issues that
you want boards to think about?
SPEAKER_02 (30:21):
Well, you know, as we're taping this today, um uh
we've just seen a new executiveorder and the question of
federal preemption of state lawson artificial intelligence.
Again, I'm not making apolitical comment on that at
all.
What I am saying is that boardsneed to really be close and
monitor the evolution of stateand federal government policy on
(30:43):
AI regulation, uh, especially asit relates to whether it's
limited regulation, federalpreemption, some overarching
federal regulation, and what thestates are doing.
The reason is we don't havestandards right now promulgated
by any government per se on whatthe board should be looking at
(31:03):
in terms of monitoringAI-related risk that could
create some type of regulatoryproblem.
We're flying blind.
Um and uh I and I understand andappreciate the impact of keeping
regulation low to enhance um uhdevelopment and uh and uh
creativity and all, but boardswhen they're trying know that
(31:24):
they need to have a AI-specificcompliance function, but when
you don't have any maturestatutory scheme to address the
the known risks of AI, again,you're kind of making it up as
you go along.
Um, hopefully there will be in2026 some effort to articulate
(31:46):
that more in terms of publicpolicy so boards and management
will have a better understandingof what they should be focusing
on in terms of uh their workwith management on uh AI-related
risk.
But I don't think we're thereyet.
And I think it's going to be akey compliance concern to get
this resolved as soon aspossible.
SPEAKER_01 (32:07):
So maybe merging some concepts here, but Michael,
do you see any changes comingforward with the culture of
compliance?
SPEAKER_02 (32:13):
Yeah, I I I do, but less in terms of any new uh DOJ
policy and more in terms of uhwhat I think would be greater
board and executive leadershipcommitment to what we've called
tone at the top.
Um, you know, it's been uh it'sgonna be almost 25 years, Rob,
since uh we had the wholecorporate responsibility
(32:37):
movement uh and coming out ofthe Enron experience in
Sarbanes.
And and we've got generationalchanges in the executive and
board leadership room, and thereand and there's not a lot of
history with some of those folkswith the excesses that created
uh the scandals then.
And but I do think that I sensevery clearly that there is a
(33:00):
willingness in the board roomsto kind of go back and it's time
to re-energize uh tone at thetop, both at the board
management level.
Um part of this I think comesfrom a renewed awareness of the
organizational and individualcost that come with breaches of
(33:21):
ethics, breaches of integrity,and also a response to the
seeming normalization ofconflicts of interest.
In other words, I just it's asense that people are saying,
maybe it's time that we we paymore attention to traditional
principles of corporateresponsibility and leadership,
both walking the walk andtalking the top.
(33:43):
I that's that's my expectationfrom a culture of compliance
perspective uh in the comingyear.
SPEAKER_01 (33:49):
And how do you see all that affecting uh the
executive leadership team?
SPEAKER_02 (33:52):
Well, I think this is gonna be an absolute critical
trend going forward.
Uh we're talking a lot in thispodcast about uh greater duties
being foisted on the board, uh,maybe greater duties being
sought by the board and greateragenda issues and things of that
nature.
And you know what this is gonnado is gonna continue to put
(34:15):
pressure on the board managementdynamic and the question of what
is management's role and what isthe board's role.
That middle ground is gonnabecome much grayer.
Uh the National Association ofCorporate Directors in October
released their blue ribboncommission report for this year,
and it's all about building ahigh trust board CEO
(34:37):
relationship.
And what I believe in 2026, Rob,is that we're gonna see many
boards heeding in some way oranother NECD's recommendation to
make strengthening the boardmanagement relationship an
absolute imperative.
And so I just, you know, I justthink that's critical.
SPEAKER_01 (34:57):
So, Michael, we made a reference over to CarMac.
So Ed McMahon now has in my handthe last envelope.
What is our governance to say orsay is our last development or
thought for 2026?
SPEAKER_02 (35:07):
Well, I'll go back to the well on that one, Rob.
And again, I think it's a sensethat boards will at some point
recognize that they are going toneed to urgently up their game
on oversight of the company's AIdeployment.
Um, that it's going to be boardsare going to be prompted by a
sense that the pace of AIdeployment is rapidly outpacing
(35:28):
the current ability of the boardto monitor it as to use, as to
accountability, as to the impacton the workforce, and especially
as to trust and risk.
This is not a criticism of AI.
It's essentially a recognitionthat deployment in our industry
is going so rapidly and acrossso many fronts that the board's
(35:54):
ability to monitor, to keep afinger on the pulse of what's
going on, and to understandwhat's going on and to
understand the expectations isgoing to be jeopardized because,
again, it's we let's end wherewe started from.
It's drinking from the firehose.
And I think it's going to beimportant that the board at some
(36:14):
point come together and say isthe mechanism that we have
currently in place to monitorhow AI is acquired, deployed,
and monitored throughout theorganization, is it working?
What do we know?
And what how do we need to makeit better?
That's the one, you know, as Isaid, that I just can't get away
(36:35):
from that.
This something is going to be anoverwhelmingly important issue
in 2026.
SPEAKER_01 (36:41):
Well, Michael, thank you so much for wrapping up
2025, for forecasting 2026.
We appreciate all you've donefor our listeners this year.
We'll be back next month withour next governance podcast
discussion where we'll dig intothe latest developments around
the role and conduct of thegoverning board.
Michael, thank you very much.
SPEAKER_02 (36:58):
Thank you, Roman.
SPEAKER_00 (37:04):
If you enjoyed this episode, be sure to subscribe to
AHMLA Speaking of Health Lawwherever you get your podcasts.
For more information about AHLAand the educational resources
available to the health lawcommunity, visit
americanhealthlaw.org and stayupdated on breaking healthcare
industry news from the majormedia outlets with AHLA's Health
Law Daily Podcast, exclusivelyfor AHLA comprehensive members.
(37:27):
To subscribe and add thisprivate podcast feed to your
podcast now.
Go to americanhealthlaw.orgslash daily podcast.
Popular Podcasts
Two Guys, Five Rings: Matt, Bowen & The Olympics
Two Guys (Bowen Yang and Matt Rogers). Five Rings (you know, from the Olympics logo). One essential podcast for the 2026 Milan-Cortina Winter Olympics. Bowen Yang (SNL, Wicked) and Matt Rogers (Palm Royale, No Good Deed) of Las Culturistas are back for a second season of Two Guys, Five Rings, a collaboration with NBC Sports and iHeartRadio. In this 15-episode event, Bowen and Matt discuss the top storylines, obsess over Italian culture, and find out what really goes on in the Olympic Village.
iHeartOlympics: The Latest
Listen to the latest news from the 2026 Winter Olympics.
Milan Cortina Winter Olympics
The 2026 Winter Olympics in Milan Cortina are here and have everyone talking. iHeartPodcasts is buzzing with content in honor of the XXV Winter Olympics We’re bringing you episodes from a variety of iHeartPodcast shows to help you keep up with the action. Follow Milan Cortina Winter Olympics so you don’t miss any coverage of the 2026 Winter Olympics, and if you like what you hear, be sure to follow each Podcast in the feed for more great content from iHeartPodcasts.