What's underneath? Getting to the critical core of collegiality.

• Author: Kaback, Hoffer
• Position: Martin Lipton - Column

WORTHY OF careful attention is a recent 17-page (single-spaced) governance commentary by Martin Lipton, one of the finest corporate lawyers this country has produced.

His memorandum is entitled "Some Thoughts for Boards of Directors in 2007." The name of the dish is bland, but its ingredients are spicy.

Numerous propositions are urged. They include that (a) the board has moved from being a group that advises to one that monitors, (b) a board that questions everything that management does will be frozen out of the information it really needs--because management does not trust it, (c) requiring information about shareholder-proposed director candidates to be set forth in the company's proxy statement is a very bad idea, and (d) because the demise of the plurality-vote standard for board elections is inevitable, companies should now "proactively" adopt majority voting requirements.

One theme Lipton especially emphasizes is the criticality of maintaining board "collegiality."

Initially, let's revisit what the word means. The New Shorter Oxford English Dictionary (1993 edition) informs us that "collegial" means pertaining to a body of colleagues, and "collegiality" refers to the relationship, and joint responsibilities, of colleagues.

Lipton goes further than this. He seemingly grafts onto "collegiality" the notion of something like "effective interactions born of mutual familiarity." Here is his position:

"The emphasis on board independence should not cause the board to lose sight of the importance of promoting the sort of board dynamic that can most effectively lead to a well-functioning board and an effective partnership between [it] and senior management ... [Some maintain] that social and philanthropic ties among and between the directors and the CEO be considered as impugning, if not destroying, independence. [But that is] the antithesis of the kind of collegiality and relationship with the CEO that is necessary for the board and CEO together to promote the appropriate tone at the top, to agree on the corporate missions and work collectively to enhance the corporation's business. Companies need ... directors who possess sufficient character and integrity to allow them to make judgments unaffected by considerations affecting themselves or those with whom they have relations. The concept of directors as remote strangers and the board as the agency for the discipline of management, rather than as advisor to management in setting the strategic...