What it means to be a fiduciary; A formula for meeting the expectations of the role: be deeply informed, perpetually skeptical, and collegially independent.

• Author: Knerr, Anthony
• Position: ROLE OF THE DIRECTOR

"FIDUCIARY" IS NOT a word one hears much in common usage these days. It has a certain Victorian ring to it--an aura of vigorous rectitude out of touch with our contemporary world of moral relativism.

But "fiduciary" is at the heart of governance. Sitting on any governing board--corporate, mutual fund, or nonprofit--means first and foremost serving as a fiduciary. And that concept is as relevant today as it was 75 or 100 years ago when our grand-parents learned the basics, if not more so.

At its root, "fiduciary" derives from the Latin fidere, to trust. A fiduciary is someone who holds something in trust for another. Its Anglo-Saxon synonym is "trust," derived from the Middle English traust, meaning trust, protection, or firmness. These two linguistic first cousins share a common concept of confidence in the integrity, veracity, and reliability of someone to act on another's behalf.

At the heart of being a fiduciary

The heart of being a fiduciary is acting as you would wish another to act on your own behalf. Representing the interests of the shareholder as a director of a company means putting yourself in the position of continually asking how you would wish to be treated if you were yourself a shareholder. Would you feel--at all times and in all circumstances--fully comfortable with the judgments, actions, and decisions you made as a director? Would you be prepared to entrust additional resources--financial, intellectual, personal--to such a person? Would you have confidence that such trust would be warranted, tomorrow morning as well as 10 years from now?

This view of being a fiduciary is, of course, but a restatement of the Golden Rule--"Do unto others as you would have them do unto you"--put into business terms. My own experience is that the Golden Rule provides clear, unambiguous, and straightforward guidance as to appropriate behavior, whether in the boardroom, the showroom, or the conference room.

At its heart, the Golden Rule supplies a disarmingly direct way of assessing one's own conduct as well as that of others. It rests, in the final analysis, on a deceptively simple judgment, though one difficult to always follow and often one that is uncomfortable in application. It is hard to believe that board members of Adelphia, MCI, or Tyco were truly acting as they would wish to have been treated.

Essential characteristics

A true fiduciary--one who constantly acts as he or she would wish to be treated by someone acting on his or her...