A ready resource.

• Position: LETTER FROM THE CHAIRMAN

AT A RECENT director roundtable, one in a series on "boardroom challenges" presented by DIRECTORS &BOARDS and the Debevoise & Plimpton law firm, the question arose as to whether independent directors should hire outside advisers to evaluate a transformational acquisition opportunity. The discussion among the 30 directors focused on a hypothetical company whose CEO was proposing to diversify away from a "dying business" by acquiring a large company with "an attractive future," though in a distantly related field. As one roundtable participant commented, the acquisition opportunity represented"a strategic right turn." Although the participants held mixed views regarding whether a board should directly and independently hire strategic consultants, some thought that such a hire could help the board make a more objective assessment of fundamental strategic alternatives.

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Boards have been directly hiring outside consultants for many years, as most visibly evidenced by the audit committee's requirement to hire the outside auditor. Increasingly other board committees, in particular the compensation committee, are demanding that the outside consultants report to them. Not that long ago, the CEO and his top HR executive hired the consultants, who in turn often felt beholden to management. Now comp committees are choosing the consultants and insisting upon their independence and objectivity

Whereas once comp consultant's reports were prepared with management and presented first for the CEO's review and approval, these reports now often go directly to the comp committee, sometimes "for their eyes only." Moreover, comp committees are regularly holding executive sessions with the consultants. Although management continues to be involved, the comp committee, in particular the comp committee chair, manages the process. the comp committee negotiates and...