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Almost a year ago, I joined the board of a multibillion-dollar, publicly traded company with which neither I nor my law firm has a relationship. Post Sarbanes-Oxley, some people thought I was nuts. And believe me, I asked around. Many firms now prohibit or, at least, strongly discourage their partners from serving as directors for the firm’s corporate clients. For the 2004-2005 year, national statistics on board appointments show that a little less than 10 percent of nonexecutive directors at U.S.-based public companies had a J.D. And even fewer were actually practicing attorneys. But my recent experience has raised some interesting questions: In the scandal-laden blood sport of today’s corporate world, should boards rethink the common view against the value of practicing lawyers as independent directors? And despite the increased potential liability from lawsuits seeking a director’s personal assets, should lawyers re-evaluate the merits of such service on nonclient boards? THE INSIDE ATTORNEY Traditionally, lawyers have sat on the boards of their own clients. Most of the commentary deals with that practice. Proponents maintain that the lawyer as director is an arrangement that benefits both attorney and client. Lawyers who serve on their client’s board gain greater familiarity with the client’s business, achieving a depth of understanding that many companies complain their outside counsel lack. The attorney-client relationship is solidified. And, at least in theory, the lawyers’ board service opens up unequaled opportunities for further business generation. Indeed, for many, many years, more business was the primary reason law firms strongly supported the practice. In turn, the corporate client benefits from always having legal counsel in the boardroom when corporate policies are discussed and decisions made. The lawyer-director can provide early warnings, long before something becomes a serious legal problem. And because the lawyer giving advice is also a board member, that advice is likely to be grounded in a more comprehensive and better-informed understanding of the company’s business. In addition, because a lawyer-director must meet such a high standard of care, her fellow directors may enjoy more confidence in and pay closer attention to her advice. Arguably, the risk of personal liability inherent in a directorship will drive the lawyer-director to really dig down into an issue. To be fair, opponents of the practice outline some significant disadvantages. One difficulty is knowing when a lawyer-director serving on a client’s board is providing legal advice and when she is giving business advice. Is it enough for the lawyer-director to simply state that she is giving business advice? Even when accompanied by such caveats, will that advice be taken as strictly business advice by the nonlawyer directors? For that matter, does the lawyer-director always want her counsel taken as business advice? When it is, the communication falls outside the attorney-client privilege and becomes discoverable in a lawsuit. To complicate things even further, what happens when the lawyer-director is called to give guidance to the client’s board in her legal capacity? As a director, she must then decide whether to act on her own advice, making her her own client. (Did you follow that?) Opponents also argue that there is an inherent loss of independence when a lawyer serves as a director for a client. To meet the required standard of care, a director must have sufficient independence from management to monitor management’s effectiveness, oversee strategic planning, and handle myriad other obligations. Because lawyer-directors often receive substantial fees from corporate clients — often a significant goal of the relationship — they may not be able to discharge their director duties with enough objectivity. They may even be too biased or conflicted to serve on key board committees such as audit, compensation, and nominating, where they could otherwise arguably make a substantial contribution. LET’S LOOK INTO IT MORE Interestingly, there is very little commentary on whether a lawyer should serve on the board of a nonclient corporation. It is hard to tell whether this is because in the post-SOX world it’s assumed that no attorney in his right mind would do it or because the fewer possible ethics and conflict issues make the subject less interesting. But my own recent experience, the experience of similarly situated colleagues, and the little commentary I have found suggest that this subject deserves more serious discussion. When Hewlett-Packard’s investigation of its leaky board blew up, the company’s stumbles set off a vigorous round of debate on every possible aspect of the situation. I asked several colleagues this question: Do you think it would have made a difference if a lawyer who was an independent director had been on the board? Would a seasoned attorney with good critical-thinking skills have been likely to raise her hand and say to her director colleagues in closed sessions, “Hey, this pretexting thing, it just doesn’t smell right. Let’s look into it more”? If that didn’t work, would a lawyer-director have found it easier to say to Larry Sonsini, the company’s well-respected outside counsel who advised that pretexting was technically legal, “I’m really not comfortable with this,” and precipitate further discussion? Most people I spoke with agreed that it probably wouldn’t have made any difference for Hewlett-Packard. News accounts portray a board that was so emotional and fractured over the leaking that such a message would have fallen on deaf ears. But in other situations, such words of warning might help a company avoid a sticky problem. Of course, the right individual qualities are imperative for any board member. The particular style, personality, and, in many cases, legal experience of the lawyer-director are crucial. Not all attorneys are created equal. A close colleague at my own firm cautions about lawyers’ tendency to pigeon-hole issues into narrow legal categories. The kind of business challenges that face corporate directors often demand a broader view. Another colleague who has served as a director on a nonclient board agrees that just the fact that you’re a lawyer won’t make you a good director. But, she adds, lawyers can be especially helpful in heavily regulated industries where so many business decisions must be seen in light of numerous legal limitations. Still another colleague, whose practice is dominated by representing boards, agrees that a lawyer-director can be helpful in heavily regulated industries, but warns of the risk that a lawyer whose experience is particularly germane may end up unduly dominating the board’s decision-making process. One executive at a prominent director-search firm says that “the worst situation” would be to refuse even to consider lawyers for boards. An executive at a different search firm notes a decrease in lawyers serving on boards and says that most companies do not see lawyers as having particularly appealing backgrounds. But this individual also calls lawyers “an underrated asset and particularly additive because of the judgment, wisdom, and breadth of experience they bring to a board.” Another director-search specialist reports “a slight uptick” in companies looking specifically for lawyer-directors in the context of the stock-option backdating mess. But this individual cautions against “finding a long-term solution for a short-term problem.” A company “should not be seeking a former Securities and Exchange Commission lawyer just to guide it through backdating questions if that person lacks other relevant skills.” Indeed, a worst case might be the lawyer-director who loses sight of his proper role and becomes antagonistic to the company’s in-house counsel or its outside attorneys in his area of legal specialty. No lawyer-director can forget that he is there as a director with legal experience, not a lawyer with a seat on the board. A QUESTION OF JUDGMENT That said, an antagonistic lawyer-director might well have had a positive effect on Hewlett-Packard’s internal squabbles. But as one director-search specialist advises, companies should hire expert outside counsel to advise on particular legal problems. They should seek out lawyer-directors who can see the bigger picture. In the best-case scenario, an attorney brings to a corporate board long experience in solving problems unemotionally and sorting through very nuanced fact patterns and circumstances. While boards generally have their own corporate counsel to provide legal advice on specific issues, a lawyer-director’s additional experience and training in legal analysis, crisis management, and problem solving can prove useful, particularly when directors meet in closed sessions. As I am a relatively new lawyer-director, my own experience is far from extensive. But even in my short tenure, I believe that the critical thinking and problem-solving skills I gained as an attorney have aided the company in navigating some choppy waters and have proved particularly valuable in wading through an ugly, now-historic proxy battle that triggered difficult legal questions. Certainly, they helped me better understand what the heck was going on and substantially informed my thinking. Conversely, I believe my experience as a director has helped me take a broader, more holistic approach in serving my own legal clients. As a director with fiduciary responsibilities, I have gained a better perspective on what really happens inside a corporation and the breadth of the issues that CEOs face when making decisions on legal strategy. My interactions with a company’s general counsel from the perspective of a board member have given me insight into the pressures on those other general counsel for whom I myself perform legal services. Certainly, the experience has given me a contextual understanding that I otherwise would not have had as a member of my law firm’s team on one of the biggest, most public stock-option backdating cases around. As I was getting my feet wet as a new director, I asked the king of lawyer-directors, Vernon Jordan, what single piece of advice he would give to a newbie. He said, “Just use your common sense and good judgment.” Clearly, common sense and good judgment are not unique to lawyers — indeed some might argue the opposite is true. But a refrain ran through all my conversations on this issue: that there is a particular kind of judgment that lawyers can bring to boardroom discussions. Corporate America might very well want our specific sort of common sense in the boardroom when the big decisions are made.
Leslie T. Thornton is a partner in the D.C. office of Dickstein Shapiro, where she focuses on internal corporate investigations, congressional inquiries, and matters before government agencies.

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