Respect Directors

“The director has obligations to all shareholders. Beyond his legal duties, he must recognize the broad social responsibilities he has to the general public and to the country. A director of a company must keep a broad outlook, high hopes and believe in the future of this country. He must keep his feet on the ground, but this need not keep him from looking off to the horizon.”

--Sidney J. Weinberg, Former Managing Partner, Goldman Sachs Address before Harvard Club of Cleveland, May 1949



The era of the independent corporate director is upon us. In response to the financial abuse that results from too-cozy relationships among directors, today’s new public board has at least one or two independent directors, and sometimes more. Some may even be a bit too activist for your taste.

Of course new requirements for director independence under Sarbanes-Oxley, NYSE and NASDAQ mean that regulators also are focusing on this area. But the real challenge for CEOs is not to fight the trend.

Mutual funds, rating agencies, analysts and investors look for fissures within the board. Remember how Hewlett Packard imploded because there was a fundamental lack of respect among the board itself, with leaks, spying and betrayal of trust.

Whether the directors are called “independent”, “outside” or “non-management”, the principle is that they function as a surrogate for external—and in many cases—governmental regulation.

Your legacy as a business leader will depend on how well you can work with these independents, and still maintain control of the board—good luck.

(c) 2008 Adonis E. Hoffman