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In the W$J's fascinating profile of John L. Hennessy, president of Stanford University, I noticed this information about university presidents who sit on boards of directors: "A 2005 Chronicle of Higher Education survey found that about a third of presidents at four-year universities served on at least one board, though just 12% sat on more than one."

The personal benefits to the university president of such a position are obvious:

Mr. Hennessy's November haul included a $75,000 retainer from Cisco Systems Inc., on whose board he sits, plus $133,000 in restricted Cisco stock, proceeds of $452,000 from selling stock in Atheros Communications Inc., where he is co-founder and chairman, and a $384,000 profit from the exercise of Google Inc. stock options. He sits on Google's board.

In addition, the university can benefit in various ways, most importantly fund-raising:

Mr. Hennessy is a fixture in the Valley's social scene, often to Stanford's benefit. In 1999, he helped land a $90 million gift from Netscape co-founder Jim Clark, who taught engineering with Mr. Hennessy at Stanford in the early 1980s.

He also persuaded Yahoo Inc. co-founder Jerry Yang -- his former student and a current Stanford trustee -- to help lead a successful $1 billion fund-raising campaign. Just this month, Mr. Yang announced he and his wife will donate $75 million to the university.

Including Mr. Yang, Stanford's 33-member board numbers 16 people who are venture capitalists, private-equity investors, money managers, or current or former high-tech executives or directors.

From a company's standpoint, the value of having a university president as a director may seem less obvious. In Hennessy's case, a company would be getting the services of a well-connected Silicon Valley veteran. More nefariously, a company (read "Google") might have a political motive: Google licenses technology from Stanford. According to the W$J, "Google CEO Eric Schmidt says the company expects no special treatment from Stanford." But Google has other connections to Stanford that may raise eyebrows:

"Stanford's library is one of a handful that has participated in a Google project to digitize books so that the public can search the texts."
"In November, Google pledged $2 million to Stanford Law School's Center for Internet and Society, founded by Stanford professor Lawrence Lessig, known for his views that copyright laws are often too restrictive."

In each instance, Stanford claims to have taken steps to contain the conflicts of interest, but I am curious about this relationship between university presidents and the companies on whose boards they sit. Are many of them as intertwined as Stanford and Google?

My only prior encounter with this has been in several Delaware cases, including In re Limited Inc. and In re Walt Disney Co. Deriv. Litig. In the former case, the Delaware Court of Chancery had "reasonable doubts" about the independence of Gordon Gee, who had served as President of The Ohio State University when it received a $25 million donation from Leslie Wexner, founder, President, Chief Executive Officer, and Chairman of Limited, Inc. The court reasoned:

Mr. Wexner's gift of $25 million to Ohio State was, even for a school of that size, a significant gift. While the gift was not to Gee personally, it was a positive reflection on him and his fundraising efforts as university president to have successfully solicited such a gift. In this context, even though there can be no "bright line" test, a gift of that magnitude can reasonably be considered as instilling in Gee a sense of "owingness" to Mr. Wexner. For that reason, I conclude that the plaintiffs have successfully alleged a reasonable doubt as to Gee's independence from Mr. Wexner's domination.

If the court had "reasonable doubts" about the independence of Gee -- who no longer served as Ohio State's President at the time of the lawsuit -- I suspect that it would have no doubt about Hennessy's lack of independence if the issue ever arose.

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In the W$J's fascinating profile of John L. Hennessy, president of Stanford University, I noticed this information about university presidents who sit on boards of directors: "A 2005 Chronicle of Higher Education survey found that about a third of presidents at four-year universities served on at least one board, though just 12% sat on more than one."

The personal benefits to the university president of such a position are obvious:

Mr. Hennessy's November haul included a $75,000 retainer from Cisco Systems Inc., on whose board he sits, plus $133,000 in restricted Cisco stock, proceeds of $452,000 from selling stock in Atheros Communications Inc., where he is co-founder and chairman, and a $384,000 profit from the exercise of Google Inc. stock options. He sits on Google's board.

In addition, the university can benefit in various ways, most importantly fund-raising:

Mr. Hennessy is a fixture in the Valley's social scene, often to Stanford's benefit. In 1999, he helped land a $90 million gift from Netscape co-founder Jim Clark, who taught engineering with Mr. Hennessy at Stanford in the early 1980s.

He also persuaded Yahoo Inc. co-founder Jerry Yang -- his former student and a current Stanford trustee -- to help lead a successful $1 billion fund-raising campaign. Just this month, Mr. Yang announced he and his wife will donate $75 million to the university.

Including Mr. Yang, Stanford's 33-member board numbers 16 people who are venture capitalists, private-equity investors, money managers, or current or former high-tech executives or directors.

From a company's standpoint, the value of having a university president as a director may seem less obvious. In Hennessy's case, a company would be getting the services of a well-connected Silicon Valley veteran. More nefariously, a company (read "Google") might have a political motive: Google licenses technology from Stanford. According to the W$J, "Google CEO Eric Schmidt says the company expects no special treatment from Stanford." But Google has other connections to Stanford that may raise eyebrows:

"Stanford's library is one of a handful that has participated in a Google project to digitize books so that the public can search the texts."
"In November, Google pledged $2 million to Stanford Law School's Center for Internet and Society, founded by Stanford professor Lawrence Lessig, known for his views that copyright laws are often too restrictive."

In each instance, Stanford claims to have taken steps to contain the conflicts of interest, but I am curious about this relationship between university presidents and the companies on whose boards they sit. Are many of them as intertwined as Stanford and Google?

My only prior encounter with this has been in several Delaware cases, including In re Limited Inc. and In re Walt Disney Co. Deriv. Litig. In the former case, the Delaware Court of Chancery had "reasonable doubts" about the independence of Gordon Gee, who had served as President of The Ohio State University when it received a $25 million donation from Leslie Wexner, founder, President, Chief Executive Officer, and Chairman of Limited, Inc. The court reasoned:

Mr. Wexner's gift of $25 million to Ohio State was, even for a school of that size, a significant gift. While the gift was not to Gee personally, it was a positive reflection on him and his fundraising efforts as university president to have successfully solicited such a gift. In this context, even though there can be no "bright line" test, a gift of that magnitude can reasonably be considered as instilling in Gee a sense of "owingness" to Mr. Wexner. For that reason, I conclude that the plaintiffs have successfully alleged a reasonable doubt as to Gee's independence from Mr. Wexner's domination.

If the court had "reasonable doubts" about the independence of Gee -- who no longer served as Ohio State's President at the time of the lawsuit -- I suspect that it would have no doubt about Hennessy's lack of independence if the issue ever arose.

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