Friday, November 5, 2010

Gone, Baby, Gone: Lawyer-Directors

The Directors Roster that is published in every issue of Directors & Boards is mostly well known for its tracking of newly elected women directors and the noteworthy data findings from that research.

But many other insights into director recruitment and board composition come out of our Roster research. Here is one such finding worthy of note: In the Directors Roster launch year of 1994, the percentage of lawyers taking a seat on corporate boards was 11%.

Can you guess the percentage total in 2009? The answer: 1%. That is a major ramping down.

A smart aleck might chime in and say, “Gee, I am surprised it was so high.” The common wisdom is, “Why would a lawyer choose to join an existing or potential client board? Why subject yourself to revenue-foreclosure possibilities for the firm? Or risk being tripped up by the director independence rules or potential conflicts of interest? Or the liability”

But as our Roster data suggest, there obviously was in governance days of old — not so old at that — a greater representation of lawyer-directors.

One of my favorite anecdotes relating to the role lawyers played as board members was told to me by Raymond Troubh.

Regular readers of Directors & Boards will be familiar with Ray Troubh. He is one of our favorite authors — always chock full of important insights on board leadership and generous with his wise counsel on being a good director. Ray proudly wears the mantle of professional director. A graduate of Yale Law School, he came to corporate directorship first as a lawyer and then as a banker, before hanging out his shingle as a fulltime director.

The background in law was a valued asset he brought to his board work. We talked about that when I interviewed him for the “Oral History of Corporate Governance” that I did in 2001, on the occasion of the 25th anniversary of Directors & Boards. In reviewing his career trajectory from law school to the boardroom, here is a snippet of what he had to say:

“For board purposes the combination of my legal and investment banking experience was a great advantage. As a young lawyer I used to attend board meetings and draft minutes and prepare resolutions and watched how boards functioned — watched the chemistry among the directors. As an investment banker I made presentations to boards on doing financings or doing a tender offer or merger. And because I understood corporate law I was not as afraid of lawsuits and of standing up to the hostile bar.”

You can imagine what a comfort it was to his fellow board members to have a peer steeped in the rule of law, and procedures of law, and someone who is able to go toe to toe with inside and outside counsel as well as opposing counsel. Who would not want to serve on a board with a member like that?

For better or worse, the Directors Roster is documenting that those days are over. An option for knowledge sharing and “courage making” among the close circle of board members has been made moot — just as directors are being barraged by an unprecedented onslaught of new regulatory and investor aggressiveness.

What a time it would be to have within their ranks a member intimate with the law — the law as wielded by Congress and the White House, regulatory agencies, and the plaintiff’s bar.

It’s clear that, post-Dodd-Frank et al., boards need to embrace an ever-closer relationship with inside and outside counsel. For this Boardroom Briefing, we tapped many experts in the legal community who are close advisors to boards for their current best advice on a range of timely and pressing governance matters. Click here to access a copy.