Independent Oversight in Board-Level Disputes
When and how boards should retain strategic counsel independent of transactional and litigation teams.
Author's interest disclosure
Disclosure. The author advises boards in the capacity this article describes. The argument below is therefore both reasoned and self-interested, and readers should weigh it accordingly.
A board facing a material dispute — a regulatory investigation, a shareholder action, a strategic litigation, a cross-border commercial claim — typically turns first to the counsel that already knows the matter. Incumbent counsel are informed, invested, and on hand. They are also, in nearly every case, the wrong people to tell the board whether the strategy they are executing is the right one. This article argues that Swiss boards should, above a defined threshold of materiality, retain strategic counsel structurally independent of the transactional or litigation teams running the matter — and sets out when, how, and on what terms.
1. The structural problem
The problem is not one of competence. The best-run Swiss and international firms produce competent, diligent, often excellent litigation work. The problem is one of structural position. The team running a matter is, by construction, the team whose strategy is being tested. They are the people whose judgment brought the board to its current posture. Asking them to assess whether that posture is right is asking them to audit their own work. They may do so honestly, and many do. But honesty is not the variable; structure is.
Incumbent counsel face three forces that pull toward continuity of strategy even when continuity may not serve the company.
Sunk capital. Months or years of relationship investment, research, and positional commitments create a weight favouring the existing course. The rational response to sunk cost is to ignore it; the human response, in a firm structured to sell ongoing engagement, is not.
Economic alignment. A firm’s economics in most disputes reward continued engagement, not reassessment. This is true whether fees are hourly or capped, success-based or mixed. No reputable firm deliberately extends matters for fee reasons; every firm is nevertheless better-off when engagements extend than when they end.
Cognitive commitment. The team that built the strategy believes in it. This is a feature in execution — confident advocacy matters — and a bug in reassessment. The confirmation bias that reasonable advocates develop on behalf of clients is precisely what a reassessment must counteract.
None of these forces requires impropriety to produce the observed pattern: boards get the strategic read of their counsel, not a strategic read on their counsel. The gap is filled, when it is filled at all, by an independent voice — in-house counsel, a non-executive director with relevant experience, or external advisors engaged specifically for the purpose.
2. The governance case for independence
The case for independent oversight is not merely operational; it is a duty question. Under Art. 717 OR, the director’s duty of care has a procedural content: decisions must be taken on adequate information and with genuine deliberation. Where the information on which the board decides whether to continue, to settle, or to change course comes from the same source as the strategy being decided on, the information is insufficient by construction.
This is not a hypothetical point. Swiss Federal Supreme Court doctrine on the Swiss business-judgment standard ties deference to the quality of the information input. A board that relied exclusively on the incumbent team’s assessment of the incumbent team’s strategy, and whose decision is later reviewed in liability proceedings, has a thinner procedural record than one that also obtained an independent read. The value of the independent read, for liability purposes, is not that it reaches a different conclusion; it is that it exists.
The governance case also operates in the other direction: independent oversight often confirms the incumbent strategy. The value of the confirmation is not zero. A board that proceeds with a course endorsed by an independent advisor after structured review has a qualitatively different position — internally, vis-à-vis shareholders, and in any later liability proceedings — than a board that proceeded on the confidence of the team running the matter.
3. Thresholds
Not every dispute warrants independent oversight. The costs — in time, in fees, in friction with incumbent counsel, in the cognitive load on the board — are real. The threshold question is where materiality crosses the line at which the cost is plainly worth bearing.
Four dimensions matter, and no one of them is individually dispositive.
Financial materiality. The clearest case is a dispute whose worst-case financial exposure is a material percentage of the company’s equity, or whose resolution will meaningfully reshape the balance sheet. In the author’s practice, the threshold typically sits where worst-case exposure exceeds five per cent of equity or a sum that, if lost, would alter the company’s financing capacity — but the bands are matters of practitioner judgment on which reasonable advisors differ, and the structural dimensions below often matter more than the financial one.
Strategic materiality. A dispute whose outcome will determine or constrain the company’s strategic optionality — a competitor’s claim that, if sustained, alters the business model; a regulatory action that, if lost, forecloses a market; a shareholder action that, if successful, changes the board’s composition or the shareholder structure — warrants independent review regardless of its financial quantum.
Reputational materiality. Disputes that will be publicly adjudicated in the press as well as the courts — allegations of fraud, of systemic misconduct, of fiduciary breach — present a reputational dimension that financial or litigation counsel may be structurally ill-placed to weigh. The strategy that minimises legal exposure is not always the strategy that minimises reputational damage. Independent oversight can surface the tradeoff and put it before the board.
Governance materiality. Where the dispute itself implicates the board’s own conduct — a liability action against directors, an investigation touching current management, a shareholder challenge to a recent board decision — incumbent counsel face a conflict even when the company is the nominal client. Independent oversight is not a luxury in these situations; it is the structural precondition for the board to function as the decision-maker rather than the subject of the decision.
4. Mandate design
An independent oversight mandate done poorly is worse than no mandate at all: it consumes resources, creates friction, and supplies a false assurance. Done well, it is narrow, time-bound, and structurally distinct from the execution engagement. The design questions below are drawn from repeated practice.
Scope. The mandate should be defined by the question, not by the matter. “Advise the board on whether the current strategy in matter X is the right strategy, and if not, what the alternative should look like” is a question. “Second-chair the litigation” is a matter. The former preserves independence; the latter merges the advisor into the team under review.
Reporting line. Independent advice flows to the board, or to a duly constituted board committee, not to management. Where the dispute is one in which management may also be reviewed — criminal investigations, internal misconduct allegations, matters touching the CEO — the reporting line to the board directly is non-negotiable. Intermediating through general counsel is appropriate where general counsel is not themselves under review; where they are, it is not.
Information access. The mandate must give the advisor unrestricted access to the matter files, to the incumbent team, and to any relevant internal material. An independent review on curated information is not independent. The incumbent team’s cooperation is typically offered and typically given; the mandate should provide for its being compelled if necessary.
Duration. Independent oversight is episodic, not continuous. It is engaged when a decision is in front of the board — whether to litigate, whether to settle, whether to change strategy, whether to disclose — and concludes when that decision has been made and recorded. It is not a standing advisor role and should not become one; the value of independence erodes with the length of the engagement.
Independence warranties. The advisor should confirm in writing that they have no conflict with any party to the matter, no financial relationship with incumbent counsel, and no commercial incentive in any particular outcome. The warranty should be renewed at each material decision point.
Output. The output of the mandate is a written opinion to the board — not an exchange of calls and emails. The opinion identifies the question, the considered alternatives, the factors weighed, and a reasoned recommendation. It forms part of the board’s record for the decision. If the advisor’s view is not adopted, that too should be recorded, with the board’s reasons.
5. What independence looks like in practice
The independence that matters is structural, not rhetorical. Three markers distinguish a mandate that will produce the reassessment the board needs from one that will produce a courteous endorsement of the incumbent strategy.
No shared economics. The advisor and incumbent counsel do not share fees, do not reciprocate referrals, and are not in a position to become co-counsel on the matter being reviewed. The industry is small enough that these relationships often exist pre-engagement; the mandate should require their disclosure and, in material cases, their severance for the duration.
No shared hinterland. The advisor should not be the firm that, twelve months ago, placed a partner with incumbent counsel, or co-advised on a related matter, or sits with incumbent counsel on a common institutional board. These are not improprieties; they are gravitational fields. Structural independence means the absence of such fields, not merely their non-operation.
No career stake. The individual advisor should not have a professional relationship with incumbent counsel of a kind that could colour the review — a partner at a firm where incumbent counsel is a frequent counterparty, a former colleague of the incumbent team’s lead, a member of a professional community in which criticism carries reputational cost. Independence here requires affirmative seeking.
Where these conditions are met, and where the mandate is designed as set out above, independent oversight produces an identifiable kind of product: a dispassionate, structured, honest reassessment of a strategy by someone with no stake in its continuation. It is sometimes confirmatory, sometimes corrective. Above the materiality threshold sketched in section 3, the cost is, in the author’s practice experience, well spent; below it, the board should think twice before commissioning the mandate.