Specific services rendered.

• Author: La Blanc, Robert E.
• Position: Endnote - Column

Given the usual composition of most boards of directors, a CEO will generally have readily available individuals or firms that are well qualified for special projects within the company. However, the use of directors as consultants can be controversial.

Boards are typically structured to include a variety of talents, often including directors with operational, financial, technical, political, and legal backgrounds. There are a number of ways CEOs can call on this extensive knowledge and experience if they want to fully utilize this valuable resource. Most often, necessary advice and counsel is generously and freely given as part of the routine interaction among fellow directors and business leaders, At times, however, a company (or CEO) may require a specific service which one of the directors may be particularly well qualified to provide.

There are advantages to calling on the expertise of individuals who are already familiar with the company. Tasks can be accomplished more quickly, inexpensively, and with more security than would otherwise be possible. For these particular projects or problems, it may be most appropriate to utilize the services of one of the directors or his or her firm. Care must be taken, however, to avoid the appearance of using directors on special projects as management's way of buying directors and thus compromising their independence.

Several examples in my own experience illustrate this point.

A closely held company of which I was a director was planning a public equity offering. Having spent 10 years on Wall Street and been chosen by Institutional Investor magazine as the leading analyst in my area made me particularly well qualified to prepare the company for this proceeding. My firm formulated and presented a seminar to a large group of line and staff managers on what it means to be a public company. It dealt with the following types of questions:

* How does the public in general and the Wall Street analysts in particular view a company?

* What characteristics does the investment community examine when evaluating a company?

* How do investors view past operating data to predict the future?

* What information and data would have to be revealed?

* What potentially competitive information could be withheld?

* How would management be judged?

* What changes would have to be made?

In this case, the CEO felt that my knowledge of the company plus my prior experience made me the logical choice for such a task. Because...