The 'Socratic' Director
How do you represent the shareholders at the meetings of the board? Personally, I try to follow a variation of the Socratic method. I mainly ask questions. Of course, I try to avoid second-guessing the management. A company does not benefit from either a totally compliant board nor from one that tries to dominate the management. My attitude is that a strong management is cultivated by providing some guidance to it. If the company has that type of management, asking the right questions may be sufficient. If the management seems too dense to get your message, you may have the wrong management -- or you may have been too subtle. But if you really get a brushoff on something you consider important, speak to the other directors. There is nothing like introducing a well-prepared motion to get the chairman's attention. In any event, the director needs to exercise discretion in carrying out the role. If you are asking questions on every item on the agenda, you are probably becoming a nuisance and diluting your effect iveness. But, if meeting after meeting goes by and you do not open your mouth -- except to second the motion to adopt the minutes -- then you probably are not earning your director's fee.
Murray Weidenbaum, director of the Center for the Study of American Business at Washington University in St. Louis, Mo., in "The Director as a Cultivator of Management" [Winter 1984]. He later became chairman of the research institute.
Testimony to Board Activism
Once again, stories of mammoth corporate mergers dominate the business and trade press. Texaco's record-breaking acquisition of Getty had just received clearance from the Federal Trade Commission when Socal announced a still-larger $13.4 billion merger with Gulf Oil, followed shortly by Mobil's proposal of merger with Superior Oil. Although "Big Oil" grabbed the merger headlines, 1984 has been, thus far, a year of general corporate consolidation. The rapid succession of announced oil mergers prompted a revitalization of congressional cries of "merger mania" and accusations that these companies were "drilling for oil on Wall Street."
I would cite the activist roles independent directors have recently had in takeovers, both friendly and unfriendly. For example, after deciding that the Royal Dutch offer for the 30% of Shell it did not already own was too low, a committee of Shell's independent directors retained an investment banker to perform an evaluation to determine an equitable price. Two years ago, four independent directors of Bendix Corp., led by Mobil President William P. Tavoulareas, resisted the "quick fix" offer of merger with Allied Corp. as a way out of a morass resulting from Bendix and Martin Marietta bidding for and...