Recent allegations involving a senior Trump administration official portends controversy with the scope of health system advisory board service and the protections afforded to its members.
Advisory boards are popular vehicles by which health systems can involve former board members, community leaders and influential health industry observers in the strategic direction of the system while preserving strong ties to the communities they serve. The advisory board is a particularly valuable mechanism in post-merger situations, as a way to accommodate directors who lost their seats in the combined governance structure.
Advisory directors typically have no vote, but are provided with conduits through which they may provide advice to management, and are often supported with confidential health system information from which they can provide the advice. They are usually only subject to the duty of loyalty (primarily with respect to confidentiality).
However, recent reports in national media outlets concerning the advisory board service of a senior Trump administration official may prompt questions from advisory board members on their own legal exposure, and whether they are covered by the health system’s D&O insurance. The official had in the past been an advisory board member for a marketing company, which recently settled (financial payment) charges with the FTC associated with defrauding investors. According to media allegations, the official provided the FTC with untruthful responses to questions concerning his awareness as an advisory board member of the conduct that led to the charges.
Given the prominence of the official, this story has the potential to continue in the media forefront for some period of time. As a result, there may be value for the health system’s governance committee, teaming with the general counsel, to proactively clarify for its advisory board membership their roles, fiduciary status and extent of D&O and related insurance coverage.