Early last year, Chesapeake Energy filed a lawsuit contending its former CEO took confidential data, including maps of potential oil and gas drilling sites, and used the information to start a competitive company.
Ride-sharing company Lyft filed a complaint in San Francisco Superior Court in late 2014 accusing its former COO of stealing confidential product plans and financial information as he exited the company to join rival Uber.
While these accusations play out, it’s a good time to take a look at C-level departures and the need to protect the company they are leaving. It’s well-documented that intellectual property (IP) theft occurs at an alarming rate when employees leave a company. Recent events underscore that IP theft can take place at the highest levels, where access to the most confidential and sensitive information is typically unfettered.
Unfortunately, too many companies screen employees on the way in, but not on the way out.
Think about it—organizations execute due care when vetting C-level candidates to ensure a good hire for a position of such responsibility. They put candidates through a rigorous interview process that includes extensive background checks. Many boards of directors even require an investigation of the candidate, often involving private investigators that specialize in this type of vetting.
But are these organizations and boards exercising the same level of diligence when senior executives leave? Are there processes in place to protect the organization’s confidential information? Not always.
Companies should have a policy in place that mitigates risk when employees depart. At least two actions are critical:
1. Review the employee’s online activity during the 30-day period preceding notice of resignation, or during the period when an employee may believe they are going to be terminated.
2. Review Confidentiality and Intellectual Property Agreements with the departing employee in advance of their departure and require a certification that all confidential information in the employee’s possession has been returned and/or destroyed.
These practices are even more critical for executives. After all, no one in the company is in possession of more sensitive information than senior management.
When a senior executive departure is imminent, the CEO should take the lead by working with the company’s most senior information security resource and legal team to examine the departing executive’s recent activity. Both parties should review agreements that were signed at the beginning of the executive’s tenure. The departing executive should be reminded of their obligations and asked to certify that they are not in possession of confidential information and that they will protect confidentiality after they have moved on.
If the CEO is departing, the board must act. A director should be designated to work with the senior information security resource and legal team to conduct the needed reviews of activity and agreements. That director may be empowered to select another senior executive in the company to act in their place.
The company risks significant harm when departing employees take work product or confidential information with them. It’s too large of a risk to ignore. And with respect to senior management, the potential for damage is too big to rely only on trust.