October 3, 2025 • 25 mins
Rob Gerberry, Senior Vice President and Chief Legal Officer, Summa Health, speaks with Michael Peregrine, Partner, McDermott Will & Schulte, about several emerging governance concerns that are positioned for center-stage prominence on upcoming board agendas. These extend beyond the usual operational and financial considerations to include those with unique social, ethical, economic, and geopolitical impact.
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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, visitAmerican Health Law.org.
SPEAKER_01 (00:17):
Welcome everyone.
This is Rob Gerberry.
I'm the Chief Legal Officer ofSUMA Health, the president-elect
designated of the AmericanHealth Law Association.
I'd like to welcome you to thelatest in our continuing series
of podcasts on corporategovernance issues affecting
healthcare organizations.
Today's topic is designed tocoincide with the autumn board
meeting calendar, in which manyof our members will be called
(00:39):
upon to provide a governanceupdate for board and committee
members.
In that regard, several emerginggovernance concerns are
positioned for center stageprominence on upcoming agendas.
These extend beyond the usualoperational and financial script
lines to include those withunique social, ethical,
economic, and geopoliticalimpact.
(01:00):
Some are big picture in scope,while others are more immediate
in interest.
Collectively, these are topicsthat board members as well as
management want to be made moreaware of.
As a leading governance advisorto the board, the general
counsel, likely teaming up withthe chief governance officer, is
well situated to brief the boardon these topics and their impact
(01:20):
on the board agenda.
As always, we're joined by myHLA colleague and friend Michael
Peregrine of McDermott, who isalso an HLA fellow and a fellow
of the American College ofGovernance Council.
So, Michael, what tells me thatyou have exactly 10 emerging
topics in your pocket to sharewith our audience today?
SPEAKER_02 (01:38):
Well, Rob, you've hung around me long enough to
know that in Michael's world,there's only room for 10 of
anything.
Not nine, not 11, but 10.
But to show uh that I'm flexibleas a matter of nature, I'm going
to add some honorable mentiontopics as a special gift for
you.
So we will probably go a littleabout 12 today.
We'll see if we get to them.
SPEAKER_01 (01:56):
Excellent.
So let's start off withsomething uh of a a lot of us in
the chief legal officer positionhave been hearing about.
Directors being worn out by allthe demands of their board
service, combined with the rapidchanges that are impacting our
industry.
Is that on your list today?
SPEAKER_02 (02:11):
It certainly is, Rob.
It's number one.
And we call it director fatigue.
Yeah, you know, for many yearswe've been uh those of us in the
governance area have been askedby clients, you know, can we get
rid of term limits?
How do we were how can we focuson keeping directors, allowing
them to serve longer terms?
Um now it's kind of theopposite.
(02:33):
Uh uh the emerging governancechallenge doesn't seem to be how
many terms we can get directorsto serve, it's rather getting
them to serve the full length oftheir first term before they
bail.
Um board leadership isincreasingly being called to
address uh director retentionchallenges.
We're getting signs that boardmembers are becoming exhausted
(02:54):
by their fiduciary workload.
I think there was an article inFortune about this a month or
two ago.
The fatigue seems to be comingfrom a byproduct of service on
multiple boards, very complexboard agenda, extremely detailed
uh briefing books, you know,greater third party scrutiny,
and then I think dealing withthe constant social, financial,
(03:16):
and political change.
So I I think there item numberone on my list is uh to
encourage the board to considercredible solutions to what could
be an acute problem of directorsjust getting worn out.
And we really can't afford tolose good directors at this
point in time with all thechanges facing the industry.
SPEAKER_01 (03:36):
So, Michael, is one of the factors that you see
creating director fatigue, youknow, that being a board level
information overload?
SPEAKER_02 (03:43):
Oh, totally, absolutely, it has to be.
And we know that because weproduce a lot of the documents
that go to the board.
I I think that the it's thatproverbial drinking from the
fire hose problem.
You know, in other words, theamount of information needed to
brief board members is justsimply overwhelming their
capacity for preparedness.
That, you know, when it whenthey're getting too much to read
(04:04):
and preventing them from beingprepared for board meetings,
that's a threat to effectivegovernance.
There's just so much that theyneed to know, both about what's
going on internally within theorganization, and I think now,
especially what's going onexternally, that many directors
are having a hard time keepingup.
And this is kind of separate anddistinct, but still part and
(04:24):
parcel of the fatigue.
It's just that there is so muchinformation they're being asked
to read and keep up with.
I do believe uh much of it is inthe last year or so with events.
We have to be thinking aboutsolutions.
And they can be found in changeshow information to share with
the board is identified,formatted.
I'm a big one-page Ronald Reaganmemo type person, edited and
(04:48):
made available at the time ofinformation delivery.
How do we package information tothe board?
What works for them, um, and howdo we send it to them?
How do we timely make itavailable to them?
Um, and then we another solutionis also more effective use of
committees with board delegatedpowers.
Uh, but let me be clear on thisone, Rob, and be very serious.
(05:09):
Fewer board meetings isn't theanswer because that just simply
means consolidating moreinformation, crunching more
information into a more confinedperiod.
We need to find an answer toinformation overflow.
SPEAKER_01 (05:20):
I could tell you from my board that met 19 times
over the last year as part ofour sale transaction, there is
definitely information overloadthat we're providing to them.
So, Michael, we've talked beforeon this podcast about the need
for civility in the boardroom.
Just yesterday, too, my lawstudents asked me, does
respectful discourse stilloccur?
Are you seeing that as part ofyour top 10?
SPEAKER_02 (05:40):
Well, it's still occurring, you bet it's number
three because civility in theboardroom isn't a new issue, as
you say.
It's it is an ongoing concern.
Uh, and so that's there's anoffshoot uh on my list of
civility.
I call it perspectivestolerance.
Uh, in the context of a crowdedboard agenda and pressure on the
(06:01):
board, the chair is going to bechallenged to maintain a
boardroom culture that supportsa couple of things: independence
of mind, uh, contrary views,allowing all director voices to
be heard, encouraging a culturethat encourages the freedom to
constructively express contraryviews.
(06:23):
In other words, I'm I'm notgoing to be called an idiot by a
board member because I uh raisesomething that comes out of uh
left field, and protects againstbullying and disrespectful
conduct.
There are a variety of issueshere, but again, tolerance of
different perspectives.
I'm just hearing from clientsfar too many situations in which
there's an effort, uh, and itcan come from a variety of
(06:46):
sources, to seek conformityamongst board members as to
perspective and to force outthose board members who have
different views.
In other words, uh the concernis at the the chair's
perspective, are we are wesomehow intentionally or
unintentionally seeking outboard members who come from a
single point of view?
(07:07):
Are we so intolerant of otherperspectives that we are losing
board members who might bringdifferent views, different uh
thoughts to the board?
Um forceful change to addressthe signs of an oppressive
boardroom dynamic really may benecessary.
We've got to avoid it becauseotherwise the purpose of uh
(07:28):
board diversity of thought isreally lost, and that's super
dangerous.
SPEAKER_01 (07:33):
So, Michael, there's a lot going on right now in the
broader economy that healthindustry boards uh need to keep
on their radar.
You know, what in your mind arekey emerging topics right now
that we want to make sure toflag for these autumn board
meetings?
SPEAKER_02 (07:45):
Rob, this is number four on my list, and I and I tie
it next to the perspectivetolerance issue because what I'm
about to say might be the kindof thing that would say,
Peregrine, you idiot, what areyou bringing that stupid issue
in front of the board for?
Um and number four is on my listsomething that I would never in
the world have envisioned at thebeginning of the year.
But now I see it as an importantdevelopment that we need to
(08:07):
understand and monitor becausehealthcare is a highly regulated
industry that is dependent inlarge part on government
reimbursement and other funding.
And it's the whole thing aboutwhat I would call uh government
corporate involvement, or whatothers call state-sponsored
capitalism.
(08:27):
It's where we see the federalgovernment seeking to become
more involved in the businessaffairs of companies that get
subsidies, grants,reimbursement, or special
licenses from the government.
Um so far it's been manifestedthrough efforts, you know, we've
all seen it to influenceleadership selection or tenure,
to encourage changes inoperational processes or
(08:47):
policies, or making directinvestment in the company or
other things.
You know, we we've all read thestories.
And I'm not saying it's good,it's bad, or indifferent.
I have no idea.
All I know is it's importantthat health industry boards are
aware of it, they monitor it andthey prepare a framework of how
they would respond should theybe in a situation in which
(09:08):
they're working with thegovernment, and all of a sudden
the government becomes uh seeksto uh address a relationship
that it will allow it to have agreater stake in directing the
company's affairs.
Is it is it out from left field?
Sure, but we can't say itdoesn't exist.
And I think it's just somethingthat maybe the strategic
planning committee of the boardjust be aware, monitor it, uh,
(09:30):
and kind of anticipate whatwould happen if if we were asked
by the government uh that ittake a greater uh uh share in
how we run our business.
SPEAKER_01 (09:41):
So, Michael, I know we've talked from time to time
about uh the board's role andexercising oversight of AI
implementation and utilization.
Do you have anything in your top10 related AI?
SPEAKER_02 (09:52):
Absolutely.
And of course, I think we're wehave slotted to talk about AI
oversight as our next podcastseries, but a topic with real
ascending is uh ascendancy uh tome is the whole thing about
workers who find their jobsassumed by AI or similar
technology.
The people who in the workforcewho are you know, the workforce
(10:12):
culture where uh individualworkers are at any level from
the bottom to the top reallyworried about whether they're
gonna lose their job to AI.
So, number five on my list isthe convergence of governance,
human capital, and technology.
Because I do think that we'reseeing that converge more and
more.
There's a growing recognitionthat boards have some
(10:35):
responsibility to monitor uhlarge-scale workforce
displacement, especially, butnot solely when it's caused by
technology.
The National Association ofCorporate Directors has several
white papers that talk aboutthis, and I think they're useful
resources.
The theme here is that boards ofcompanies that anticipate
significant AI use should beencouraged to monitor what its
(10:59):
impact's going to be on thestability of the workforce and
interrelatedly on its externalreputation.
This is, you know, as we readthe news every day, and we're
seeing evidence of displacementin both technology and
white-collar workforces arise.
It's not just young coders whoare impacted.
And I think the board, uh, andcertainly Pope Leo uh has spoken
(11:23):
out on this.
The board needs to think notonly about its fiduciary
responsibility, as the NECD hasoutlined, but perhaps also a
little bit about its moralresponsibility.
What are its values and how arethey applied in the context of
workforce displacement bytechnology?
What are the responsive measuresthat a board might take through
its management?
(11:44):
Worker education, retraining,specialized job placement, but a
consistent application of corecorporate values.
I think it's an issue that'sreally emerging, Rob, and boards
should have some aspect of thison their agenda.
SPEAKER_01 (12:00):
So, Michael, I was just reading in my downtime an
interesting post in the DNODiary about the lasting impact
of the whistleblower hotlineprovisions in Sarbanes-Oxley.
Do you have anycompliance-related topics in our
top 10?
SPEAKER_02 (12:11):
Well, Rob, I'm delighted that you and I read
the same uh uh uh outlierpublications.
Uh I I I read that post too, andit reminded me that we're kind
of losing some of the importantcorporate responsibility lessons
of Sarbanes-Oxley.
Uh, you know, that was over 20years ago, but um it still uh
remains important from a varietyof perspectives.
(12:32):
And number six on my list dealswith kinds the issue of
hotlines, the hotline concept,the whistleblower outlet that
arose out of the concept ofSarbanes.
And my focus and for purposes ofthis uh top 10 is is more about
the increasing emphasis on whatI call the little things, the
compliance minutiae.
(12:53):
Uh and I I'm encouraging myclients to think about efforts
to protect their officers anddirectors and the organization
from liability that areassociated with, well, have we
filled out forms correctly?
Have we filled them outcompletely, uh, internally and
externally?
Uh whether it's a conflict ofinterest questionnaire or some
(13:16):
other kind of required internaldisclosure, or it's an external
disclosure like a tax return, aprofessional bio, an appraisal
form, evaluation, or even a loanapplication.
Um, you know, the whistleblowerhotline is a very easy way for
concerned employees to report onwhat they think to be
falsification of such forms.
(13:38):
That could have a devastatingimpact on an officer or
director.
So number seven on my list isfor CLOs to sit down with
officers and board members andsenior executives and say, hey,
look, let's let's take a lessonfrom the outside world.
We need to be really, reallycareful.
Spend a little bit extra time onthat questionnaire, on that
application.
You just never know uh when thatcomeback may come back to bite
(14:00):
you.
And even though it may be anunwarranted inquiry, you don't
want to go through it.
SPEAKER_01 (14:06):
So, Michael, I know sometimes clients in the
healthcare industry viewthemselves as part of this
isolated industry segment uhrather than as part of the
global economy.
We mentioned earlier, you know,looking beyond our four walls.
Is that something you thinkboards should be concerned with?
SPEAKER_02 (14:19):
Yeah, I think we have to be, Rob.
We learned this a little bitduring the COVID era.
People remember that.
Um, but geopolitical volatilityis my number seven on my list.
I think most healthcare companyboards should have an improved
understanding about how globalevents such as military
conflict, tariffs and traderelations, natural disasters,
(14:44):
human rights crises, and regimechange could impact uh domestic
business operations and supplychains.
Again, we saw in the COVID areahow the supply chains just had
extraordinarily uh criticalimpact on healthcare
institutions.
These kinds of events canrapidly evolve into tangible
enterprise risk for the healthsystem that could require the
(15:06):
board to reor reorient itsagenda for a much closer focus
on global trends and events.
Now, I I'm not suggesting thatthat uh board members or senior
management read you knowinternational newspapers or or
global uh media uh to searchevery day, but there really
needs there there really needsto be a recognition of a value
and some kind of board awarenessthat we're the organization may
(15:28):
actually be implicated or uh byuh international impact imp let
me just restate that there beimpacted by international events
or or you know otherwiseproperly considered as part of
the global economy.
Where do we get our medications?
Where do we get our nurses?
Where do we get our researchers?
Um where are we selling our orbuying our services to?
(15:50):
And I think the the answer isRob that a lot of boards will
say, yeah, we we probably arehave uh are part of the global
economy, and we need to be morealert as an enterprise risk of
how things across the globemight affect us.
And again, um uh a boardroomvisit, I think, from the CFO or
the chief technology officer orthe supply chain manager might
(16:12):
help educate board members onthis uh concept.
SPEAKER_01 (16:17):
Great.
I know, Michael, you said a fewminutes ago that you had a
couple of AI-related items inour top 10.
We mentioned workforcedisruption.
What might be the other?
SPEAKER_02 (16:25):
Well, I think my number eight might be a stretch
to some.
Uh it's what I refer to as theimpact of AI self-regulation.
You know, I think most of ourlisteners will recall the recent
rollout of the administration'sAI action plan.
And, you know, the goal of thatwas to improve the country's
competitive status andtechnology.
But part of that plan uh is toidentify and eliminate what the
(16:49):
plan calls cumbersome federal orstate regulations that could
impede private sector AIdevelopment.
In other words, at least I tookit this way, there's probably
not going to be any nationalregulatory scheme as it relates
to some of the concerns createdby AI, perhaps beyond trust and
stuff like that.
You know, prior regulatoryproposals in other
(17:12):
administrations focused a lot onthe irresponsible use of AI and
how that could affect societalharm, you know, fraud,
discrimination, bias,disinformation, um, stifle
competition, things of thatnature.
Um, if we're not going to sothey created an awareness of the
kinds of risks that could ariseuh uh from a corporate use of
(17:34):
AI.
If we're not going to have aformal set of federal code of
regulations governing use of AI,the question is, are healthcare
companies going to be kind of ontheir own in terms of an
awareness of the types of harmsthe company could nevertheless
be exposed to in third-partylitigation or regulatory
(17:58):
intervention or reputation?
In other words, I guess what I'mtrying to say is there's a
potential guidance gap here.
If we're not going to have uh,for for better or for worse, a
national AI regulatory scheme oron a state level because of
concerns that it would impede AIdevelopment, then I think
(18:20):
responsible uh boards are goingto want to ask their compliance
officers, do we need our do weneed to come up with our own
internal controls?
Do we need to look for industryguidance to have a better
compliance program with respectto the the broad universe of
risks associated with AIdevelopment?
Again, I'm not trying to createa problem where one doesn't
(18:41):
exist.
I do think it's it's worth theinternal boardroom discussion.
What's the impact if we don'thave national AI regulation?
SPEAKER_01 (18:50):
So, Michael, in our last podcast, you and I had a
fascinating discussion, I thinkat least you and me, uh around
the fiduciary duty of candor.
Does that make your list?
SPEAKER_02 (19:00):
Yeah, it does.
It's it's number 10.
And I think, Rob, as we said uhin our last board podcast, board
members are going to benefit, Ithink, from a refresher course
on the fiduciary duty of candor.
Uh, you know, as we talkedabout, directors can't knowingly
lie or omit information whenspeaking with their fellow
directors uh or to others towhom they owe a duty as to
(19:21):
information that's relevant andmaterial to the company.
You know, Rob, as you and I weretalked about, it's really the
duty to shoot square with yourfellow board members and others
to whom you might be in afiduciary relationship.
And as we talked about, and Ithink it's really important to
remind that Delaware case thatuh where the court publicly
(19:43):
shamed the fiduciary for failingto disclose highly relevant
information.
I I want my board members toknow that while this may be a
highly unusual remedy, it's outthere.
And there is something called acandidate requirement.
And you know, you don't need toworry about monetary penalties
if a court has the power totrash your reputation.
(20:05):
So I think it's on the list.
SPEAKER_01 (20:08):
And speaking of our uh corporate reputations, we had
a discussion in a prior podcastabout um brand and that being
such a core asset thatorganizations don't want to see
impaired right now.
Anything that you'd suggestthere as far as that being part
of our top 10?
SPEAKER_02 (20:22):
Yeah, I think it's really useful.
We talked a little bit aboutthis, Rob, back at the beginning
of the year in the darkest ofwinter, but the um the uh
relations firm Edelman comes outwith an annual report uh uh on
organizational trust.
And and this year they spoke tothe twin concepts of trust and
reputation as corporate assets.
(20:44):
And that that's and I thinkthat's it's important for board
members to realize that theseare separate concepts, they're
somewhat related, uh, but theyare both viewed as assets of the
organization.
And I think they're intangibleassets, but it it's important
for board members to know howtrust and uh and reputation are
(21:07):
impacted by issues that confrontorganizations, uh issues uh and
the extent to which that thepublic perceives business,
including healthcareorganizations, as providing this
the default solution on issuesthat the government does not
address.
In other words, and I don't wantto get into a policy
(21:28):
gobbledygook, but it's I thinkimportant that the Edelin survey
kind of commends the boards anappreciation of for the
difference between reputationand risk, what they both mean,
how both are earned, preserved,and lost.
SPEAKER_01 (21:44):
So as we come down the home stretch of this
podcast, I'm looking for someDavid Letterman drumsticks to
say, let's move to the honorablemention section of this uh
series.
What would you add to that list?
SPEAKER_02 (21:55):
Well, you know, you've got the beard, but not
quite as long as Letterman does,I think, at uh these days.
Um but there are two topics thatum actually there could be three
that fall into that category forthe fall board agenda.
Um, first is one uh that I I Iwe we've had this discussion
before.
I think it's really for theboard to apply some kind of
constructive skepticism toproposals aimed at enhancing the
(22:20):
mechanism of governance.
And by that I mean stuff likethe proposed use of AI to
generate meeting minutes, aswell as to support governance
operations like evaluations,internal controls management,
legal and regulatory updates,executive comp and workforce
strategy.
I mean, we we see many finecompanies proposing products
(22:41):
that are going to help boards inthese areas, and all I'm saying
is uh let's kind of tap thebrakes a little bit on whether
that works or not or whether itcreates more problems.
It particularly concerns me withrespect to using AI to generate
meeting minutes and boardevaluations.
Another honorable mention, Rob,is the new action by the FTC
(23:02):
concerning non-compete in thehealthcare industry.
Um the FTC chair recently wrotea letter to large healthcare
employers, you know, warningthem about non-competes and
restrictive covenants uh thatcould be considered overly
restricted.
So we've still got that issue,even though there's a change in
administration.
And it's so it continues to be,it's a compliance risk that
(23:23):
needs to be dusted off and can'treconsidered by the board and
its compliance committee.
And to that end, uh veryrecently uh the FTC just
announced another uh situationwhere uh uh it uh was resolved
an overlapping board uh uhconcern between with board
(23:43):
members between companies thatthe FTC viewed as competing.
And it's a reminder that againin the new administration, uh
the FTC it continues to carryover that focus on uh antitrust
prohibitions against individualsserving on boards of competing
organizations.
So all of those are important uhand I think fall into uh are
(24:04):
worthy of an honorable mentionlisting.
SPEAKER_01 (24:07):
Well, Michael, I'm sad to say that after only two
games, there is no mention ofNotre Dame football anymore in a
top 10 or an honorable mentionlist, is there?
SPEAKER_02 (24:14):
Half faith, Rev, half faith.
When do they play?
Navy and Army and and uh all thejunior colleges, those are still
coming up on Notre Dame'sschedule.
SPEAKER_01 (24:23):
Well, to our audience, we thank you for
always uh participating with usin these discussions.
We'll be back again next monthwith a discussion of guidelines
for board oversight of AIimplementation.
And in other ways, board mayinteract with these new
technologies uh that they'rebeing uh implemented within
their organizations.
Until then, it's Rob Gerbery andfrom Michael Peregrine saying
(24:43):
thanks again for listening andgo Irish.
SPEAKER_00 (24:51):
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SPEAKER_01 (00:17):
Welcome everyone.
This is Rob Gerberry.
I'm the Chief Legal Officer ofSUMA Health, the president-elect
designated of the AmericanHealth Law Association.
I'd like to welcome you to thelatest in our continuing series
of podcasts on corporategovernance issues affecting
healthcare organizations.
Today's topic is designed tocoincide with the autumn board
meeting calendar, in which manyof our members will be called
(00:39):
upon to provide a governanceupdate for board and committee
members.
In that regard, several emerginggovernance concerns are
positioned for center stageprominence on upcoming agendas.
These extend beyond the usualoperational and financial script
lines to include those withunique social, ethical,
economic, and geopoliticalimpact.
(01:00):
Some are big picture in scope,while others are more immediate
in interest.
Collectively, these are topicsthat board members as well as
management want to be made moreaware of.
As a leading governance advisorto the board, the general
counsel, likely teaming up withthe chief governance officer, is
well situated to brief the boardon these topics and their impact
(01:20):
on the board agenda.
As always, we're joined by myHLA colleague and friend Michael
Peregrine of McDermott, who isalso an HLA fellow and a fellow
of the American College ofGovernance Council.
So, Michael, what tells me thatyou have exactly 10 emerging
topics in your pocket to sharewith our audience today?
SPEAKER_02 (01:38):
Well, Rob, you've hung around me long enough to
know that in Michael's world,there's only room for 10 of
anything.
Not nine, not 11, but 10.
But to show uh that I'm flexibleas a matter of nature, I'm going
to add some honorable mentiontopics as a special gift for
you.
So we will probably go a littleabout 12 today.
We'll see if we get to them.
SPEAKER_01 (01:56):
Excellent.
So let's start off withsomething uh of a a lot of us in
the chief legal officer positionhave been hearing about.
Directors being worn out by allthe demands of their board
service, combined with the rapidchanges that are impacting our
industry.
Is that on your list today?
SPEAKER_02 (02:11):
It certainly is, Rob.
It's number one.
And we call it director fatigue.
Yeah, you know, for many yearswe've been uh those of us in the
governance area have been askedby clients, you know, can we get
rid of term limits?
How do we were how can we focuson keeping directors, allowing
them to serve longer terms?
Um now it's kind of theopposite.
(02:33):
Uh uh the emerging governancechallenge doesn't seem to be how
many terms we can get directorsto serve, it's rather getting
them to serve the full length oftheir first term before they
bail.
Um board leadership isincreasingly being called to
address uh director retentionchallenges.
We're getting signs that boardmembers are becoming exhausted
(02:54):
by their fiduciary workload.
I think there was an article inFortune about this a month or
two ago.
The fatigue seems to be comingfrom a byproduct of service on
multiple boards, very complexboard agenda, extremely detailed
uh briefing books, you know,greater third party scrutiny,
and then I think dealing withthe constant social, financial,
(03:16):
and political change.
So I I think there item numberone on my list is uh to
encourage the board to considercredible solutions to what could
be an acute problem of directorsjust getting worn out.
And we really can't afford tolose good directors at this
point in time with all thechanges facing the industry.
SPEAKER_01 (03:36):
So, Michael, is one of the factors that you see
creating director fatigue, youknow, that being a board level
information overload?
SPEAKER_02 (03:43):
Oh, totally, absolutely, it has to be.
And we know that because weproduce a lot of the documents
that go to the board.
I I think that the it's thatproverbial drinking from the
fire hose problem.
You know, in other words, theamount of information needed to
brief board members is justsimply overwhelming their
capacity for preparedness.
That, you know, when it whenthey're getting too much to read
(04:04):
and preventing them from beingprepared for board meetings,
that's a threat to effectivegovernance.
There's just so much that theyneed to know, both about what's
going on internally within theorganization, and I think now,
especially what's going onexternally, that many directors
are having a hard time keepingup.
And this is kind of separate anddistinct, but still part and
(04:24):
parcel of the fatigue.
It's just that there is so muchinformation they're being asked
to read and keep up with.
I do believe uh much of it is inthe last year or so with events.
We have to be thinking aboutsolutions.
And they can be found in changeshow information to share with
the board is identified,formatted.
I'm a big one-page Ronald Reaganmemo type person, edited and
(04:48):
made available at the time ofinformation delivery.
How do we package information tothe board?
What works for them, um, and howdo we send it to them?
How do we timely make itavailable to them?
Um, and then we another solutionis also more effective use of
committees with board delegatedpowers.
Uh, but let me be clear on thisone, Rob, and be very serious.
(05:09):
Fewer board meetings isn't theanswer because that just simply
means consolidating moreinformation, crunching more
information into a more confinedperiod.
We need to find an answer toinformation overflow.
SPEAKER_01 (05:20):
I could tell you from my board that met 19 times
over the last year as part ofour sale transaction, there is
definitely information overloadthat we're providing to them.
So, Michael, we've talked beforeon this podcast about the need
for civility in the boardroom.
Just yesterday, too, my lawstudents asked me, does
respectful discourse stilloccur?
Are you seeing that as part ofyour top 10?
SPEAKER_02 (05:40):
Well, it's still occurring, you bet it's number
three because civility in theboardroom isn't a new issue, as
you say.
It's it is an ongoing concern.
Uh, and so that's there's anoffshoot uh on my list of
civility.
I call it perspectivestolerance.
Uh, in the context of a crowdedboard agenda and pressure on the
(06:01):
board, the chair is going to bechallenged to maintain a
boardroom culture that supportsa couple of things: independence
of mind, uh, contrary views,allowing all director voices to
be heard, encouraging a culturethat encourages the freedom to
constructively express contraryviews.
(06:23):
In other words, I'm I'm notgoing to be called an idiot by a
board member because I uh raisesomething that comes out of uh
left field, and protects againstbullying and disrespectful
conduct.
There are a variety of issueshere, but again, tolerance of
different perspectives.
I'm just hearing from clientsfar too many situations in which
there's an effort, uh, and itcan come from a variety of
(06:46):
sources, to seek conformityamongst board members as to
perspective and to force outthose board members who have
different views.
In other words, uh the concernis at the the chair's
perspective, are we are wesomehow intentionally or
unintentionally seeking outboard members who come from a
single point of view?
(07:07):
Are we so intolerant of otherperspectives that we are losing
board members who might bringdifferent views, different uh
thoughts to the board?
Um forceful change to addressthe signs of an oppressive
boardroom dynamic really may benecessary.
We've got to avoid it becauseotherwise the purpose of uh
(07:28):
board diversity of thought isreally lost, and that's super
dangerous.
SPEAKER_01 (07:33):
So, Michael, there's a lot going on right now in the
broader economy that healthindustry boards uh need to keep
on their radar.
You know, what in your mind arekey emerging topics right now
that we want to make sure toflag for these autumn board
meetings?
SPEAKER_02 (07:45):
Rob, this is number four on my list, and I and I tie
it next to the perspectivetolerance issue because what I'm
about to say might be the kindof thing that would say,
Peregrine, you idiot, what areyou bringing that stupid issue
in front of the board for?
Um and number four is on my listsomething that I would never in
the world have envisioned at thebeginning of the year.
But now I see it as an importantdevelopment that we need to
(08:07):
understand and monitor becausehealthcare is a highly regulated
industry that is dependent inlarge part on government
reimbursement and other funding.
And it's the whole thing aboutwhat I would call uh government
corporate involvement, or whatothers call state-sponsored
capitalism.
(08:27):
It's where we see the federalgovernment seeking to become
more involved in the businessaffairs of companies that get
subsidies, grants,reimbursement, or special
licenses from the government.
Um so far it's been manifestedthrough efforts, you know, we've
all seen it to influenceleadership selection or tenure,
to encourage changes inoperational processes or
(08:47):
policies, or making directinvestment in the company or
other things.
You know, we we've all read thestories.
And I'm not saying it's good,it's bad, or indifferent.
I have no idea.
All I know is it's importantthat health industry boards are
aware of it, they monitor it andthey prepare a framework of how
they would respond should theybe in a situation in which
(09:08):
they're working with thegovernment, and all of a sudden
the government becomes uh seeksto uh address a relationship
that it will allow it to have agreater stake in directing the
company's affairs.
Is it is it out from left field?
Sure, but we can't say itdoesn't exist.
And I think it's just somethingthat maybe the strategic
planning committee of the boardjust be aware, monitor it, uh,
(09:30):
and kind of anticipate whatwould happen if if we were asked
by the government uh that ittake a greater uh uh share in
how we run our business.
SPEAKER_01 (09:41):
So, Michael, I know we've talked from time to time
about uh the board's role andexercising oversight of AI
implementation and utilization.
Do you have anything in your top10 related AI?
SPEAKER_02 (09:52):
Absolutely.
And of course, I think we're wehave slotted to talk about AI
oversight as our next podcastseries, but a topic with real
ascending is uh ascendancy uh tome is the whole thing about
workers who find their jobsassumed by AI or similar
technology.
The people who in the workforcewho are you know, the workforce
(10:12):
culture where uh individualworkers are at any level from
the bottom to the top reallyworried about whether they're
gonna lose their job to AI.
So, number five on my list isthe convergence of governance,
human capital, and technology.
Because I do think that we'reseeing that converge more and
more.
There's a growing recognitionthat boards have some
(10:35):
responsibility to monitor uhlarge-scale workforce
displacement, especially, butnot solely when it's caused by
technology.
The National Association ofCorporate Directors has several
white papers that talk aboutthis, and I think they're useful
resources.
The theme here is that boards ofcompanies that anticipate
significant AI use should beencouraged to monitor what its
(10:59):
impact's going to be on thestability of the workforce and
interrelatedly on its externalreputation.
This is, you know, as we readthe news every day, and we're
seeing evidence of displacementin both technology and
white-collar workforces arise.
It's not just young coders whoare impacted.
And I think the board, uh, andcertainly Pope Leo uh has spoken
(11:23):
out on this.
The board needs to think notonly about its fiduciary
responsibility, as the NECD hasoutlined, but perhaps also a
little bit about its moralresponsibility.
What are its values and how arethey applied in the context of
workforce displacement bytechnology?
What are the responsive measuresthat a board might take through
its management?
(11:44):
Worker education, retraining,specialized job placement, but a
consistent application of corecorporate values.
I think it's an issue that'sreally emerging, Rob, and boards
should have some aspect of thison their agenda.
SPEAKER_01 (12:00):
So, Michael, I was just reading in my downtime an
interesting post in the DNODiary about the lasting impact
of the whistleblower hotlineprovisions in Sarbanes-Oxley.
Do you have anycompliance-related topics in our
top 10?
SPEAKER_02 (12:11):
Well, Rob, I'm delighted that you and I read
the same uh uh uh outlierpublications.
Uh I I I read that post too, andit reminded me that we're kind
of losing some of the importantcorporate responsibility lessons
of Sarbanes-Oxley.
Uh, you know, that was over 20years ago, but um it still uh
remains important from a varietyof perspectives.
(12:32):
And number six on my list dealswith kinds the issue of
hotlines, the hotline concept,the whistleblower outlet that
arose out of the concept ofSarbanes.
And my focus and for purposes ofthis uh top 10 is is more about
the increasing emphasis on whatI call the little things, the
compliance minutiae.
(12:53):
Uh and I I'm encouraging myclients to think about efforts
to protect their officers anddirectors and the organization
from liability that areassociated with, well, have we
filled out forms correctly?
Have we filled them outcompletely, uh, internally and
externally?
Uh whether it's a conflict ofinterest questionnaire or some
(13:16):
other kind of required internaldisclosure, or it's an external
disclosure like a tax return, aprofessional bio, an appraisal
form, evaluation, or even a loanapplication.
Um, you know, the whistleblowerhotline is a very easy way for
concerned employees to report onwhat they think to be
falsification of such forms.
(13:38):
That could have a devastatingimpact on an officer or
director.
So number seven on my list isfor CLOs to sit down with
officers and board members andsenior executives and say, hey,
look, let's let's take a lessonfrom the outside world.
We need to be really, reallycareful.
Spend a little bit extra time onthat questionnaire, on that
application.
You just never know uh when thatcomeback may come back to bite
(14:00):
you.
And even though it may be anunwarranted inquiry, you don't
want to go through it.
SPEAKER_01 (14:06):
So, Michael, I know sometimes clients in the
healthcare industry viewthemselves as part of this
isolated industry segment uhrather than as part of the
global economy.
We mentioned earlier, you know,looking beyond our four walls.
Is that something you thinkboards should be concerned with?
SPEAKER_02 (14:19):
Yeah, I think we have to be, Rob.
We learned this a little bitduring the COVID era.
People remember that.
Um, but geopolitical volatilityis my number seven on my list.
I think most healthcare companyboards should have an improved
understanding about how globalevents such as military
conflict, tariffs and traderelations, natural disasters,
(14:44):
human rights crises, and regimechange could impact uh domestic
business operations and supplychains.
Again, we saw in the COVID areahow the supply chains just had
extraordinarily uh criticalimpact on healthcare
institutions.
These kinds of events canrapidly evolve into tangible
enterprise risk for the healthsystem that could require the
(15:06):
board to reor reorient itsagenda for a much closer focus
on global trends and events.
Now, I I'm not suggesting thatthat uh board members or senior
management read you knowinternational newspapers or or
global uh media uh to searchevery day, but there really
needs there there really needsto be a recognition of a value
and some kind of board awarenessthat we're the organization may
(15:28):
actually be implicated or uh byuh international impact imp let
me just restate that there beimpacted by international events
or or you know otherwiseproperly considered as part of
the global economy.
Where do we get our medications?
Where do we get our nurses?
Where do we get our researchers?
Um where are we selling our orbuying our services to?
(15:50):
And I think the the answer isRob that a lot of boards will
say, yeah, we we probably arehave uh are part of the global
economy, and we need to be morealert as an enterprise risk of
how things across the globemight affect us.
And again, um uh a boardroomvisit, I think, from the CFO or
the chief technology officer orthe supply chain manager might
(16:12):
help educate board members onthis uh concept.
SPEAKER_01 (16:17):
Great.
I know, Michael, you said a fewminutes ago that you had a
couple of AI-related items inour top 10.
We mentioned workforcedisruption.
What might be the other?
SPEAKER_02 (16:25):
Well, I think my number eight might be a stretch
to some.
Uh it's what I refer to as theimpact of AI self-regulation.
You know, I think most of ourlisteners will recall the recent
rollout of the administration'sAI action plan.
And, you know, the goal of thatwas to improve the country's
competitive status andtechnology.
But part of that plan uh is toidentify and eliminate what the
(16:49):
plan calls cumbersome federal orstate regulations that could
impede private sector AIdevelopment.
In other words, at least I tookit this way, there's probably
not going to be any nationalregulatory scheme as it relates
to some of the concerns createdby AI, perhaps beyond trust and
stuff like that.
You know, prior regulatoryproposals in other
(17:12):
administrations focused a lot onthe irresponsible use of AI and
how that could affect societalharm, you know, fraud,
discrimination, bias,disinformation, um, stifle
competition, things of thatnature.
Um, if we're not going to sothey created an awareness of the
kinds of risks that could ariseuh uh from a corporate use of
(17:34):
AI.
If we're not going to have aformal set of federal code of
regulations governing use of AI,the question is, are healthcare
companies going to be kind of ontheir own in terms of an
awareness of the types of harmsthe company could nevertheless
be exposed to in third-partylitigation or regulatory
(17:58):
intervention or reputation?
In other words, I guess what I'mtrying to say is there's a
potential guidance gap here.
If we're not going to have uh,for for better or for worse, a
national AI regulatory scheme oron a state level because of
concerns that it would impede AIdevelopment, then I think
(18:20):
responsible uh boards are goingto want to ask their compliance
officers, do we need our do weneed to come up with our own
internal controls?
Do we need to look for industryguidance to have a better
compliance program with respectto the the broad universe of
risks associated with AIdevelopment?
Again, I'm not trying to createa problem where one doesn't
(18:41):
exist.
I do think it's it's worth theinternal boardroom discussion.
What's the impact if we don'thave national AI regulation?
SPEAKER_01 (18:50):
So, Michael, in our last podcast, you and I had a
fascinating discussion, I thinkat least you and me, uh around
the fiduciary duty of candor.
Does that make your list?
SPEAKER_02 (19:00):
Yeah, it does.
It's it's number 10.
And I think, Rob, as we said uhin our last board podcast, board
members are going to benefit, Ithink, from a refresher course
on the fiduciary duty of candor.
Uh, you know, as we talkedabout, directors can't knowingly
lie or omit information whenspeaking with their fellow
directors uh or to others towhom they owe a duty as to
(19:21):
information that's relevant andmaterial to the company.
You know, Rob, as you and I weretalked about, it's really the
duty to shoot square with yourfellow board members and others
to whom you might be in afiduciary relationship.
And as we talked about, and Ithink it's really important to
remind that Delaware case thatuh where the court publicly
(19:43):
shamed the fiduciary for failingto disclose highly relevant
information.
I I want my board members toknow that while this may be a
highly unusual remedy, it's outthere.
And there is something called acandidate requirement.
And you know, you don't need toworry about monetary penalties
if a court has the power totrash your reputation.
(20:05):
So I think it's on the list.
SPEAKER_01 (20:08):
And speaking of our uh corporate reputations, we had
a discussion in a prior podcastabout um brand and that being
such a core asset thatorganizations don't want to see
impaired right now.
Anything that you'd suggestthere as far as that being part
of our top 10?
SPEAKER_02 (20:22):
Yeah, I think it's really useful.
We talked a little bit aboutthis, Rob, back at the beginning
of the year in the darkest ofwinter, but the um the uh
relations firm Edelman comes outwith an annual report uh uh on
organizational trust.
And and this year they spoke tothe twin concepts of trust and
reputation as corporate assets.
(20:44):
And that that's and I thinkthat's it's important for board
members to realize that theseare separate concepts, they're
somewhat related, uh, but theyare both viewed as assets of the
organization.
And I think they're intangibleassets, but it it's important
for board members to know howtrust and uh and reputation are
(21:07):
impacted by issues that confrontorganizations, uh issues uh and
the extent to which that thepublic perceives business,
including healthcareorganizations, as providing this
the default solution on issuesthat the government does not
address.
In other words, and I don't wantto get into a policy
(21:28):
gobbledygook, but it's I thinkimportant that the Edelin survey
kind of commends the boards anappreciation of for the
difference between reputationand risk, what they both mean,
how both are earned, preserved,and lost.
SPEAKER_01 (21:44):
So as we come down the home stretch of this
podcast, I'm looking for someDavid Letterman drumsticks to
say, let's move to the honorablemention section of this uh
series.
What would you add to that list?
SPEAKER_02 (21:55):
Well, you know, you've got the beard, but not
quite as long as Letterman does,I think, at uh these days.
Um but there are two topics thatum actually there could be three
that fall into that category forthe fall board agenda.
Um, first is one uh that I I Iwe we've had this discussion
before.
I think it's really for theboard to apply some kind of
constructive skepticism toproposals aimed at enhancing the
(22:20):
mechanism of governance.
And by that I mean stuff likethe proposed use of AI to
generate meeting minutes, aswell as to support governance
operations like evaluations,internal controls management,
legal and regulatory updates,executive comp and workforce
strategy.
I mean, we we see many finecompanies proposing products
(22:41):
that are going to help boards inthese areas, and all I'm saying
is uh let's kind of tap thebrakes a little bit on whether
that works or not or whether itcreates more problems.
It particularly concerns me withrespect to using AI to generate
meeting minutes and boardevaluations.
Another honorable mention, Rob,is the new action by the FTC
(23:02):
concerning non-compete in thehealthcare industry.
Um the FTC chair recently wrotea letter to large healthcare
employers, you know, warningthem about non-competes and
restrictive covenants uh thatcould be considered overly
restricted.
So we've still got that issue,even though there's a change in
administration.
And it's so it continues to be,it's a compliance risk that
(23:23):
needs to be dusted off and can'treconsidered by the board and
its compliance committee.
And to that end, uh veryrecently uh the FTC just
announced another uh situationwhere uh uh it uh was resolved
an overlapping board uh uhconcern between with board
(23:43):
members between companies thatthe FTC viewed as competing.
And it's a reminder that againin the new administration, uh
the FTC it continues to carryover that focus on uh antitrust
prohibitions against individualsserving on boards of competing
organizations.
So all of those are important uhand I think fall into uh are
(24:04):
worthy of an honorable mentionlisting.
SPEAKER_01 (24:07):
Well, Michael, I'm sad to say that after only two
games, there is no mention ofNotre Dame football anymore in a
top 10 or an honorable mentionlist, is there?
SPEAKER_02 (24:14):
Half faith, Rev, half faith.
When do they play?
Navy and Army and and uh all thejunior colleges, those are still
coming up on Notre Dame'sschedule.
SPEAKER_01 (24:23):
Well, to our audience, we thank you for
always uh participating with usin these discussions.
We'll be back again next monthwith a discussion of guidelines
for board oversight of AIimplementation.
And in other ways, board mayinteract with these new
technologies uh that they'rebeing uh implemented within
their organizations.
Until then, it's Rob Gerbery andfrom Michael Peregrine saying
(24:43):
thanks again for listening andgo Irish.
SPEAKER_00 (24:51):
If you enjoyed this episode, be sure to subscribe to
AHLA Speaking of Health Lawwherever you get your podcasts.
For more information about AHLAand the educational resources
available to the health lawcommunity, visit American Health
Law.org and stay updated onbreaking healthcare industry
news from the major mediaoutlets with AHLA's Health Law
Daily Podcast, exclusively forAHLA comprehensive members.
(25:14):
And subscribe and add thisprivate podcast feed to your
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Go to americanhealthlaw.orgslash daily podcast.
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