“John, it’s Tom Russell.” “Hey! To what do I owe the pleasure?” “I’m afraid it has nothing to do with our favorite pastime.” John Clough, the CFO of NetRF, a technology company based in Salt Lake City, and Tom Russell, a vice president at Moore & Swithins, a respected Manhattan executive-recruiting firm, were avid collectors of flight memorabilia. “Too bad,” John replied. “I thought maybe you’d want to trade your Rickenbacker propeller for one of my TWA swizzle sticks.” “Hah. Actually, I have a different kind of proposal—one I think you’re going to like just as much. Benchmark has retained us to find someone for its board, and we think you’d be a terrific candidate. Would you be interested?” John felt his face getting hot. “This is going to be a stretch,” he thought. Atlanta-based Benchmark was a Fortune 500 packaged-goods company that was many times NetRF’s size. John had been at NetRF six years and, in that time, had developed a national reputation, at least in informed circles, for his financial acumen and probity. The buzz around the CFO was surprising in view of NetRF’s relatively modest revenues—$300 million in fiscal 2003. But John had built his reputation during a time when many of the financial world’s top leaders had proved to be imprudent if not inept. Still, few would’ve expected such an important public company to tap John for a directorship—least of all John himself. As John cradled the receiver against his shoulder, trying to formulate an answer, his thoughts raced back to a scene from B-school. It was the spring of his second year at Sloan, and Mellon Bank’s CFO had called John at his basement apartment to invite him to join as an assistant treasurer. He remembered thinking it was a good thing videophones weren’t in general use, so shabby were his surroundings and so acute was his embarrassment. John had the same thought now as he surveyed his frayed cubicle, with schedules and memos hastily sorted into messy piles. Tacked on one wall was a small, worn postcard of a barnstormer in a leather cap and goggles. The card read, “I’d rather be down here wishing I was up there than up there wishing I was down here.” “Ahem,” Tom said, wondering if his friend was still on the other end of the line. “So what’s involved?” John finally responded. “A lot of flying around—a spring meeting in Charleston, a strategy retreat every year in Aspen. It’d be a great honor for someone at your stage in life. And it would do you good to get to know Benchmark’s board members. Maybe Benchmark could be persuaded to buy some of NetRF’s products. What do you think?” “It certainly is an honor,” John said, struggling to keep his eagerness under wraps. Be the stoic CFO they’re looking for, he told himself. “Could you send me something in writing about what my specific duties would be?” “Sure, sure. But don’t hesitate too long,” Tom warned. “The place for due diligence is in the audit committee, which is anxious for your help.” Tom hung up the phone and immediately logged his notes from the conversation into his spreadsheet. Several executives had already turned down his offer, and Benchmark CEO Charlie Duer—Tom’s client—was getting impatient. Tom knew that while only 6% of Moore & Swithins’s revenues came from director searches, these types of assignments still needed to be handled effectively and expeditiously. Otherwise, companies would stop retaining M&S for their more lucrative executive searches. “Will he bite?” the recruiter wondered, as he absentmindedly toyed with the scale model of the A6M Zero Japanese fighter plane that had been resting on his desk. “John trusts me,” he thought. “After all, I’m the one who introduced him to NetRF, and now we’re pals. How could he say no?” Some 2,000 miles away, John was considering the invitation. NetRF was in a one-story modular building on the outskirts of Salt Lake, almost at the foot of the Wasatch Mountains. A tall chain-link fence enclosed the parking lot; NetRF employees would occasionally see hungry coyotes lurking near the metal. On this day, John saw nothing but cars. Most of his colleagues were engineers who had moved among a couple-dozen tech companies in the region, trying to catch the next wave. He enjoyed the skiing, his Cessna Turbo time-share, and the work, but he realized that there were definite limits to this environment. The 39-year-old executive had been glad to move out West, but he would certainly welcome a reacquaintance with the world of big business back East, if the conditions were right. NetRF’s engineers were focused primarily on designing wireless communications equipment that could be used in offices and homes. Most recently, the company had extended its product lines by making readers for radio frequency identification (RFID) tags. Companies were increasingly relying on RFID chips—next-generation bar codes—to streamline their supply chains, combat consumer and backroom theft, and anticipate product stock-outs. NetRF’s RFID readers boasted the most sensitive pickups, the best prices, and the lowest repair and recall rates. Because of the company’s profitability, John had been able to persuade the CEO and the board to expense stock options at a time when it was uncommon for high-tech firms to do so; for that move, he had received a good deal of admiring coverage in the financial trade press. He’d then led the company through one of 2001’s most successful IPOs. The company had floated only 17% of its equity, but the capital it raised allowed it to shrink its production cycles from 11 months to seven months. The offer to join Benchmark’s board was tempting, but John wondered: “Will I be spreading myself too thin?” While serving on NetRF’s board, he had become friends with Gordon Telford, the former CEO of Peyton Rim, a large auto-parts supplier. Gordon had retired to an enormous ski chalet in Park City, less than 40 miles from Salt Lake. The past few winters, Gordon had invited John and his wife, Missy, to the chalet for some weekend skiing. In fact, they were driving to Park City the day after tomorrow for another visit. John knew that Philip Tedeschi, the chief outside counsel to both NetRF and Peyton Rim, would also be at the chalet. He made a note to himself to e-mail Philip and Gordon before the weekend; he could discuss the directorship offer with them between trail runs. John turned away from the window and trained his attention on his computer screen. He typed “Benchmark” and “financials” into a search engine and scrolled through the results. The offer to join Benchmark’s board was tempting, but John wondered: “Will I be spreading myself too thin?” The Lap of Anxiety It was dusk when John and Missy’s yellow Land Rover crunched to a halt at the top of Gordon’s steep driveway. Awaiting them inside was a semicircle of Adirondack twig chairs arrayed in front of a cavernous fireplace, which crackled as it warmed. As suitcases were whisked upstairs, Gordon and his wife greeted the couple, walked them farther into the great room, and handed each of them a martini. “You’re going to enjoy those board meetings enormously, John,” Gordon began, “and you’ll learn a lot besides. I would never have gotten where I did at Peyton if I hadn’t had board service on my résumé. It’s an indispensable step for a fellow with your possibilities.” “I agree,” Philip added as he reached the bottom step of the long quartersawn staircase; from his room upstairs, the attorney had heard John and Missy arrive. “But don’t underestimate what’s involved. The hours can be considerable—as high as 250 per year these days. Gordon remembers a somewhat more leisurely and trusting world; my legal brethren have since built up a small industry in shareholder derivative suits, strike suits, and proxy challenges to board nominations. Your duties at NetRF are substantial, or so I’d guess from my difficulty getting you on the phone.” John didn’t know whether to smile or glare in response to that small dig. “Are you going to have time to study the big briefing books they send you?” Philip went on. “Do you know whether they’ll want you to visit a certain number of plants each year, as some companies expect now?” “I’m not sure about the visits or the meetings,” John replied. “Tom tells me I’m supposed to buy 5,000 shares of stock within 12 months, so let’s hope they go up.” “My goodness, Phil, you portray board service as a burden rather than a privilege,” Gordon commented. “It is more of a privilege than ever,” Philip argued. “Sarbanes-Oxley and today’s tougher courts have invested board members with real responsibility. But with that come some risks.” Philip embarked on a tour of the legal landscape, ending with a sketch of the territory he understood best. “You know, Utah is a business-friendly state. Board directors here are protected—even if the company’s articles of incorporation don’t extend immunity to directors who get into trouble. Where is Benchmark incorporated? Its shareholders, of course, are everywhere.” As Philip listed a series of compelling reasons for not joining the board, John wondered: “Why is he so worried about my situation? I’m not his client.” “Wouldn’t NetRF benefit if I joined the Benchmark board?” he asked. “Well, you can forget about selling RFID products to them,” Philip answered. “Your status as an independent director would be compromised.” “I thought we’d determined that most of our future growth is going to come from sales to retailers. We’d like to understand the retail sector the way Benchmark does, so I imagine this could be a real learning experience,” John said. “Tell me, though, how much do you really know about Benchmark?” Philip asked. “I can give you generic warnings, but there’s no substitute for finding out everything you can about Benchmark’s situation—pending litigation, any environmental issues, who your colleagues are going to be. You should figure out whether you can get along with them before you decide anything. I’ll get you a crib sheet with questions to ask.” “You should figure out whether you can get along with them before you decide anything.” “I think we need to know what kind of directors-and-officers insurance they’re offering,” Missy chimed in. As a partner in a local accounting firm, she shuddered to think that everything John and she had built could be taken away. “Missy, Phil, you depress me,” Gordon interrupted. “Let’s change the subject. Anybody know how to carve a pheasant?” Getting to Know You “He wants to do what?” exclaimed Linton Folds, the chairman of Benchmark’s audit committee. “He says he needs a meeting with your committee, and a separate one with Charlie, before he can give us an answer,” Tom said, hoping the static on his cell phone wasn’t obscuring his message. John had flown into Atlanta almost two weeks earlier for a meeting with the nominating committee. That visit had been cordial but, from John’s perspective, not as informative as it could’ve been. “For Pete’s sake. I know there are only three of us on the audit committee, but getting our schedules to match is going to be a task and a half,” Linton said with exasperation. “John’s no fool,” Tom responded. “He knows about the turnover you’ve experienced and some of the controversy.” “That’s to be expected, I suppose,” Linton conceded halfheartedly. To boost shareholder confidence post–Sarbanes-Oxley, Benchmark needed to certify that it had designated a financial expert for its audit committee—and John seemed to fit the bill. He would be replacing Linton, who would be stepping down from the committee. “I’ll urge Mary and Sig to find some time within the next two weeks,” Linton told Tom. “We’ll book a suite at the Ritz-Carlton, and we’ll get Charlie to meet with him just before our appointment.” Butting Heads John’s 7 AM meeting with Benchmark’s CEO, at the company’s downtown headquarters, did not go particularly well. Charlie, like John, had a financial background. So like two accounting wonks—instead of a CEO and a director-to-be—they tangled over Benchmark’s ideal capital structure. And when John mentioned that he’d like to chat with a couple of division managers and the new CFO, Charlie bristled. He had been in office only six months—six stressful months. Charlie had joined Benchmark after its former CEO, CFO, and chief auditor had been fired; the state-employee pension fund had raised questions about the way Benchmark recognized its revenues. Some analysts felt that Benchmark’s independent board members had perhaps overreacted by firing the company’s senior management. But the business had rebounded with several strong quarters, and Charlie was feeling the pressure to demonstrate to the board that his hiring had not been in vain. By 8:25 AM, John was back at the Ritz-Carlton to meet with the members of the audit committee. “How are you, John? I’m Mary Tolliver. This is Sig Rasmussen, and this is Linton Folds.” In his online research, John discovered that Mary was executive VP of marketing at Builder’s Bank; that Sig was the founder of Delilah’s, a chain of dress shops; and that Linton had led Benchmark until 1996 and once again after the dismissals. “Linton peered into every crevice when he ran things just before Charlie signed on,” Mary volunteered. “If Sig or I can’t answer your questions, Lin surely can.” “That’s reassuring,” John said, “since I didn’t get to look at the accounts in my meeting with the nominating committee. Granted, my experience with public companies is limited, but I’ve been around long enough to expect intense public scrutiny. I’m sure you could use my help there. “First off, let’s talk about the revenue-recognition issues. Does Benchmark’s stated warranty-claims rate reflect what’s really going on? There’s a lot of clumping of sales booked at the end of every quarter. When I see that, I want another look at the sales ledger. You’ve also got receivables you’re still carrying as assets, though they’re pretty long in the tooth.” Sig chuckled. “Mary and I are not accountants. That’s why we need you—to keep us on the straight and narrow.” “I hear your concerns, John,” Linton interjected. “And my guess is that you’re worried about maintaining more than just Benchmark’s margins and good name. But you have nothing to fear.” Linton made a point of monitoring judicial developments in Delaware, Benchmark’s state of incorporation. “You would have a duty of loyalty to Benchmark, which means acting in its behalf, not your own; and you would have a duty of care, which basically requires you to show up for meetings and pay attention. Do those things, and no court will challenge your business judgment.” The look on John’s face suggested that further assurances would be in order. “Keep in mind,” Linton continued, “we’re not asking you to be our CFO. You’re an expert, sure, but you’re also expected to rely on other experts like Walters & Bluitt, our new auditor.” “And that’s Charlie’s understanding as well?” John asked, looking at Mary. “This board doesn’t answer to Charlie,” she replied, stiffening slightly, “and it wasn’t chosen by him. Look, John, Sarbanes-Oxley has ushered in a new world—one that’s much safer for companies in compliance. Besides, by serving on the audit committee, you’ll know better and sooner than anybody about problems.” After an hour or so, John exchanged contact information with the others, shook hands, and headed for the hotel lobby. “Do you think we passed the audition?” Mary asked the others after John had left. • • • As he waited for the doorman at the Ritz to hail him a cab, John’s cell phone rang. It was Missy. “Your timing is perfect. I left them five minutes ago.” “So, did you get your questions answered? What do you think?” Missy asked her husband. “Well, it depends on how you look at it. If board membership is just another trophy—a collectible, like that Fokker DR1 altimeter I bought last month—we can probably just sit back and watch our net worth appreciate. But if it’s an adventure—like that trip to Mexico we took last year in the Cessna—I’ll get to develop my piloting skills but will probably encounter some bumps along the way.” Just then, the cab pulled up. John said goodbye to Missy, climbed into the taxi, and directed the driver to DeKalb-Peachtree Airport. Once there, he settled into the pilot’s seat of his Cessna, fired up its engines, pointed the plane down the runway, and embarked on the first leg of his journey West. Should John join Benchmark’s audit committee? Peter Goodson (petergoodson@good-assoc.com) is a strategic adviser to public and private corporate boards and senior management; a philanthropist; and an adjunct business school professor. He is a former partner of Clayton, Dubilier & Rice, a New York–based private equity investment firm. Given his age and the allure of board service and its accompanying perks, there is a good chance that John Clough will say yes. If he does, he will suffer for it. Most of John’s advisers do not seem to be aware that board membership no longer automatically ensures other opportunities and may actually present risks. In today’s business world, your reputation and prospects are only as bright as the performance of the last board you served on. In other words, board members tend to be lynched for their collective actions, regardless of their individual attempts to do the right thing. John proposed expensing options before it was the popular thing to do, so I suspect he probably would not be afraid to provide the leadership for governance reform. But if John fails to sway a majority to do the right thing—which, in view of Benchmark’s weak governance culture, is likely—no one will remember that it was John who smelled smoke and pleaded with the others to take bold action. By joining Benchmark’s board, John would be gambling with his reputation and exposing himself to greater liability—all for relative peanuts. John would be gambling with his reputation and exposing himself to greater liability—all for relative peanuts. Benchmark’s board has three serious defects. First, the directors do not seem to understand their sole responsibility: to serve and protect shareholders. Specifically, they do not behave like owners. The executive dismissals recently ordered seem to be largely the result of pressure from outside the company. And there is still no evidence of a board-directed plan to discover how Benchmark’s accounting became so aggressive. Such questionable practices don’t just suddenly appear. Second, top management camouflages problems and deflects sensible direct inquiry from subordinates; it treats such questioning as an intrusion. That is how mistakes grow into scandals. I remember asking a series of probing questions at one company, only to be told, “That would be a lot of ‘due-who’ for around here.” The company went on to disaster. A manager who is afraid to be open, or who shields his direct reports from meaningful director inquiry, is always a sign of trouble at a company. Third, some of the directors do not seem competent to serve in key positions. The audit committee has no idea, for example, what is at the heart of the company’s revenue-recognition problem. It did not dig for answers on its own, nor did it hire independent advisers to look into Benchmark’s promotional and discounting practices and to measure the appropriateness of the company’s relationships with key customers. The members of the audit committee ought to be able to sort out how basic revenue is recorded. Otherwise, they are just suits in seats. As the only competent member of the audit committee, John would face an uphill battle with his colleagues. If John is intent on saying yes, he would be wise to make his acceptance conditional on an independent forensic review of the books. Further, he should insist on an assessment of ongoing business risks, conducted by a group from the board that includes him. He should also ask for an increase in the number of executive sessions and the time allotted for them. And he should arrange to meet with the former external auditor and the former CEO to solicit their views. John has to be a catalyst for change before he joins the board. Once he accepts the seat, he will likely lose much of his leverage, becoming simply one vote among many. John doesn’t know it, but willing director candidates are in short supply, especially those with financial expertise. All he has to do is quietly market his availability, and the kinds of boards he’d be comfortable serving on will come to him. He can afford to go to Aspen on his own. John F. Olson (jolson@gibsondunn.com) is the chair of the Committee on Corporate Governance of the American Bar Association’s Business Law Section. He is a frequent speaker and writer on governance issues. John should think twice about joining Benchmark’s board and should probably say no for four main reasons. First, although Benchmark’s CEO has a financial background similar to John’s, Charlie and his company seem to favor a Wild West–style of financial reporting, while John and his company do not. In today’s corporate governance environment, independent directors should play the most important role in selecting board members. A board member who does not have good chemistry with the CEO is not likely to be as effective, or consulted as often, as one who does. Second, the incumbent directors blithely supply John with nostrums about the standards of legal liability for directors instead of responding to his legitimate questions about the quality and transparency of the firm’s financial reporting, which they fail to recognize is their responsibility as well as John’s. Third, it isn’t clear that NetRF would benefit in the way John expects it to. If NetRF sold a substantial number of RFID readers to Benchmark, John would lose his status as an independent director under stock exchange rules and, thus, his ability to serve on the audit committee. The posh life of yesteryear’s directors and the burnishing of one’s résumé are also bad reasons to take a board seat. The posh life of yesteryear’s directors and the burnishing of one’s résumé are bad reasons to take a board seat. Fourth, because of his financial background, John would be the point person on the audit committee and would manage that group’s relationship with the external auditor. The result would be an increased time commitment for him. He would also be one of the first witnesses called to testify in any shareholder lawsuit or government investigation. Yet there may be good reasons for John to join Benchmark’s board. He could learn more about retailing and the internal controls and financial-reporting practices of a large public company. NetRF’s CEO and the independent directors on NetRF’s board should be the final judges of whether John’s service on Benchmark’s board would interfere with his loyalty and obligations to NetRF. They will want to consider whether John’s board membership could actually subvert NetRF’s efforts to sell its product to Benchmark’s competitors, which may be troubled by the resulting connection between the two companies. Further, John’s association with any renewed accounting problems at Benchmark could soil the white-hat reputation that NetRF gained from being an early adopter of option-grant expensing. If John and NetRF’s CEO and board all conclude that the benefits of John’s membership on Benchmark’s board outweigh the risks, there are a few key items of basic diligence John should complete. He should compare the schedule of Benchmark’s board and committee meetings against his own schedule at NetRF. Particularly for a CFO, end-of-quarter and annual earnings-release and SEC reporting deadlines are crunch times. Can John handle both commitments simultaneously? A lawyer (perhaps Philip) who regularly deals with such issues should review Benchmark’s articles of incorporation, bylaws, and D&O insurance policy to determine the adequacy of liability protection and insurance coverage available to Benchmark’s directors. John should also meet with Benchmark’s new CFO and the engagement partners from the outside auditor and gauge their commitments to transparent reporting. And, as he has apparently begun to do, John should read a cross section of analyst reports and news articles published during the past 12 months to get a clear sense of how Benchmark is viewed in the financial community. He should also obtain Benchmark’s most recent 10(k) and 10(q) forms, and any recent 8(k) reports, paying particular attention to any reported changes in accounting principles, the contingencies footnotes, and the Management Discussion and Analysis sections. The decision to join another company’s board is as momentous as the decision to enter into a joint venture with that company. Both can put a person’s and a company’s reputation and future at risk. David J. Berger (dberger@wsgr.com) is a partner at Wilson Sonsini Goodrich & Rosati, a law firm based in Palo Alto, California. He represented Hewlett-Packard in its successful proxy contest to acquire Compaq. Even in this day and age, it’s still a real tribute to be offered a position on the board of a company like Benchmark. It’s all the more impressive to be offered the chairmanship of the audit committee. Unfortunately, as John’s discussion with Philip indicates, the decision to accept such a position is not easy. I share Gordon Telford’s positive view of board service: As a general rule, the benefits of saying yes far outweigh the risks—provided you’re willing to do the job right. To figure out what he wants, and whether he can do the job right, John needs to ask himself four questions. The single most important one would be, “Do I have time for the position?” Just a few years ago, it was not uncommon for boards to meet four or five times a year, with committee meetings beginning in the morning and everyone finishing up before lunch. Today, any director of a large public company like Benchmark should probably plan on devoting 100 to 150 hours per year in normal situations. This would not cover committee work, travel, and the crises that inevitably arise. As the CFO of a public company, John is undoubtedly working crazy hours already. He needs to decide whether he is willing to make this additional commitment. Assuming he has the time for some kind of board service, John must then ask himself, “Is Benchmark the right kind of company for me?” Allegations of accounting irregularities at the organization should not stop John from becoming a director, but he should find out more about how the board and management analyze such irregularities and whether the company’s decision-making process is consistent with his professional and ethical standards. He should also check with NetRF’s counsel to determine whether his presence on the board would create any conflicts of interest. Because Benchmark cannot afford to have the newly appointed chair of its audit committee resign, the board would surely go along with any reforms he proposes, thereby protecting him from professional embarrassment (or worse). Allegations of accounting irregularities should not stop John from becoming a director. If John can reassure himself on these points, he must then ask himself, “Am I comfortable playing the role I’m being asked to play?” It’s not enough that John has financial and accounting expertise and that Benchmark needs an audit committee member. John should think about whether he would be bringing the right expectations to the job and whether he has the right personality for it. For example, would he be comfortable in what is primarily an oversight role at Benchmark after having exercised operating responsibilities as CFO of NetRF? His tangle with Charlie Duer suggests he may not be. And would he be comfortable asking the kinds of elementary questions new board members must ask in order to learn how the company operates? Again, John’s hardheadedness and financial sophistication suggest he may not. However, John does seem as though he’d be willing to ask questions that management does not want to hear, which is necessary for being a good director. The final question John needs to ask himself paraphrases Nikita Khrushchev during the Cuban Missile Crisis: “Is Benchmark prepared for the worst?” To find out, John needs to use his financial expertise and search several quarters of Benchmark’s balance sheets for any potential issues. He also should have counsel determine that Benchmark’s D&O policies and indemnification agreements would protect him should he be sued as a director. Even in today’s business environment, directors who put in the time, act in good faith, and have the skills necessary to understand the company’s business incur minimal risk of personal liability. They also realize intangible benefits from their board service, some of which can be quite valuable. In John’s case, these would include exposure to a wide variety of business issues, the opportunity to build personal and professional networks—and perhaps the chance to have some fun. Charles H. King (charles.king@kornferry.com) is a New York–based managing director of Korn/Ferry International, an executive search firm, and the head of its Global Board Services practice. In reading this case, I cringed at every new development. The characters’ actions violate not only good corporate governance but also common sense. Let’s begin with the protagonist. John appears to bring a strong ego (he seems confident that Benchmark would benefit if he joined its board) but little else to the table. His limited public-company experience in a small, unrelated business has not prepared him for the complexities of a Fortune 500 organization—and most certainly not a company with the obvious challenges Benchmark faces. To his credit, he asks many of the right questions—particularly regarding the financial-reporting issues that resulted in the firings of Benchmark’s former CEO, CFO, and chief auditor. These are all enormous red flags. However, it is less clear that John recognizes the many other red flags around him. Among them are the board members’ cavalier attitudes about their responsibilities; the obvious friction between the new CEO and the board; the reluctance of the CEO and the board to provide John additional time and access so that he can conduct his own due diligence; and the fact that as a neophyte director, John would be the only finance expert on the audit committee of a board that has had serious accounting problems. Then factor in John’s obvious lack of chemistry with the new CEO. Any rational person would don the running shoes. Given my vocation, I must say a few words about the recruiter, Tom Russell, who demonstrates a wanton disregard for his client and the candidate alike. An apparent disciple of the old school of board recruiting, he has resorted, likely in desperation, to approaching a friend who, on most counts, appears to be woefully underqualified for the challenge. His attempt to sell the opportunity based on the perks that board service offers is seriously flawed if not unethical. The recruiter demonstrates his abysmal command of good corporate governance by suggesting that John, by joining the board of directors, may be able to persuade Benchmark to purchase some of NetRF’s products. Beyond being an inappropriate motivation for board service, it would (as is pointed out later in the case by NetRF’s counsel) imperil the statutory independence of the director, disqualifying him from service on the audit committee. Although recruiting has become more challenging in the era of Sarbanes-Oxley, there is a wealth of talent in the market to satisfy the needs of any corporate board. Indeed, reputable recruiting firms have faced, and successfully completed, challenging assignments with clients whose problems equaled or exceeded those of Benchmark. In those situations, however, the companies conducted their searches in a fully transparent manner, which is a requirement for recruiting qualified directors. The recruiter is obliged to serve both the client (who is paying the bills) and the candidate. Both parties rely on the recruiter, as a professional intermediary, to provide full disclosure and to act in the best interests of all concerned. To do otherwise, as this recruiter has done, is unconscionable. The only person in this case study who seems to grasp the extent of the risks is NetRF’s attorney, Philip Tedeschi. The audit committee members, to varying degrees, are caricatures of frightened, ill-qualified directors, desperately in search of a quick fix—hardly a group John should want to join. The board members are caricatures of frightened, ill-qualified directors, desperately in search of a quick fix—hardly a group John should want to join. The boardroom antics described in this case study would be fine fodder for a prime-time sitcom. Sadly, similar scenarios are still being played out in some real-world boardrooms today.
