- Susan Rice's criticism of Trump raises questions about board members' speech.
- The remarks come as Netflix is bidding for Warner Bros. — a deal that would require government approval.
- Governance watchers are divided on how politically vocal corporate directors should be.
A corporate board seat can bring status and stock awards, but it might not shield directors from political heat.
The criticism that Netflix board member Susan Rice leveled at President Donald Trump last week is dividing governance watchers over how political a corporate director can afford to be.
Rice, who served in top roles in the Obama and Biden administrations, made several disparaging remarks about the commander in chief during an appearance on the podcast "Stay Tuned with Preet Bharara." Trump responded by demanding that Netflix remove her from her seat "or pay the consequences."
The spat has come at a precarious time for the video-streaming company. Netflix's pursuit of Warner Bros. — an $82.7 billion bid — could reshape Hollywood, but it requires approval from the Department of Justice's antitrust division.
While Rice's actions didn't break any laws, governance experts who spoke with Business Insider were split over whether she crossed a line.
'Am I a public figure or am I a corporate director?'
Directors would be wise to keep their personal views about politics and other sensitive topics out of the public eye, said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware. Their fiduciary responsibility is to serve in the company's best interests, and Rice's remarks ran counter to that duty, he said.
"It's poor judgment. And you're elected as a director for your judgment," Elson said. "She has to ask herself, 'Am I a public figure or am I a corporate director?'"
Elson, himself a director, said he avoids publicly staking out political positions. "I just don't think it's in my lane," he said.
Trump's threat of retaliation, however, didn't align with the kind of conduct normally expected of a sitting president, either, said Jo-Ellen Pozner, a management and entrepreneurship professor at Santa Clara University's Leavey School of Business.
"It's really important to recognize that what Susan Rice was calling out is exactly the behavior that Trump responded with," she said. "Trump's reaction just points out how important what she has to say is."
A chilling effect
Rice spoke critically of Trump at length on the podcast, suggesting her remarks were intentional rather than off the cuff.
"This might have felt like her like the hill that she was ready to die on, metaphorically," added Pozner. "It's definitely risky for her politically. It's definitely risky for the Netflix deal, but it also seems like such a principled stance that it ought to be respected by most people."
Rice, Netflix, and the White House didn't respond to a request for comment from Business Insider.
It is possible that Rice warned Netflix's leadership about the podcast and got its blessing behind the scenes. Ted Sarandos, the company's co-CEO, referred to its bid for Warner Bros. as a "business deal" on the BBC's Today program on Monday. "It's not a political deal," he said.
Still, Rice's public and partisan tongue-lashing is unusual for a director on a major corporate board. It could make companies reconsider whether to put political figures on their boards, Elson said.
"Obviously, someone coming out of public service has a lot of experience, a lot of intelligence," said Elson. But, he added, "Are you retired or not?"
The incident could further discourage corporate leaders from speaking their minds in public, said Pozner. The president has repeatedly targeted critics, publicly calling for boycotts of companies and attacking business figures who challenge him.
"I think it will have a dampening effect on public speech," said Pozner.
Timing matters
Governance experts say the incident should serve as a case study for corporate boardrooms.
"Every company in America that has a pending regulatory approval should be watching the case," said Bradley Akubuiro, a partner at leadership advisory firm Bully Pulpit International.
"The lesson isn't: Don't have political opinions. The lesson is: Understand when your company is at peak vulnerability and govern that accordingly. … Time really does matter."
Companies may be able to prevent directors from causing a similar kerfuffle, said Akubuiro, by enacting quiet periods during sensitive moments. These would be similar to how leaders are expected to clam up in the weeks leading up to companies' quarterly earnings reports.
"You just want to recognize that in a politicized moment, anything that's quasi-political can become a weapon, and folks will use that against you for maximum leverage," Akubuiro said.
Similarly, companies need defined communication policies that set expectations for directors, especially when regulatory stakes are high, and outline what to do if a board member goes off script, said Jennifer Schielke, CEO of the staffing firm Summit Group Solutions.
"The boardroom should be designed for robust dissent that is productive and private," she said.
In a fractious political environment, it's prudent for board members to get counsel and to consider the potential costs and benefits of what they say, said Jill E. Fisch, a professor of business law at the University of Pennsylvania.
Yet, she added, "That is completely different from being cowed into not saying anything."
Disclosure: Mathias Döpfner, the CEO of Business Insider's parent company, is a Netflix board member.
