With the ESG scorecard of their companies facing heightened scrutiny, boards of directors need now more than ever to ensure continuing compliance with governance best practices. Among those, the use of independent counsel to the board is growing and expected to develop even further as the pace to achieve sustainable governance picks up.
Activist campaigns, investigations, cyberattacks, changes in governance and large-scale transactions or restructurings…the financial news offers daily examples of multifaceted situations for which corporate directors are called upon, sometimes hurriedly, to exercise objective judgement in making important decisions.
While in most cases directors may efficiently rely on senior management (including the office of the general counsel and/or board secretary) as well as its advisors to help grapple with complex issues, that reflex may at times prove insufficient. This is particularly true whenever boards are asked to review situations and render decisions where management or other key stakeholders may be interested (positively or negatively), as is often the case with structuring transactions.
Directors may then find themselves in the painful position of having to decide on matters of great importance absent sufficient perspective. Directors’ discomfort may be further underscored whenever boards are required to react within a very short timeframe or when the relevant transactions assume a high degree of legal sophistication.
This is particularly true when a specialised committee of the board is involved – whether it is permanent (strategy, audit, etc) or ad hoc, comprising a majority of independent directors – whose role is to assist the board in its decisions by analysing available data, presenting different options and assessing their respective advantages and disadvantages to stakeholders who may be affected, as well as formulating recommendations on the basis of such analysis concerning management-recommended measures.