I have been blogging on this issue for two years now, but as the July 1 deadline approaches everyone seems to be talking about it. Many public compensation committees apparently are still in the process of completing the required independence assessment for their advisers. This seems especially true for legal counsel, as to which these requirements are completely new.
Inquiring minds want to know: "Mike, how is Winston figuring out how to test for a 'business or personal' relationship between the Firm and any director or executive officer of the client?" The answer is that law firm (and most other professional service firms) tend to have a good idea of all of their connections and relationships within a client. For the most part I am able to answer the question based on my own knowledge - and that of the "relationship partner," if other than me. 95% of the time, one of us will know of any relationships, as these things tend to come out very quickly, usually before the company is even a client.
As a practical matter, if there was any relationship that could be of importance, it would have arisen long before, e.g., "My uncle Joe is on the board of ABC, maybe he can get us an introduction to them," or "My aunt Jane is the CFO of ABC, maybe she can get us an introduction to them". However, for some larger clients, I have sent around an email to all those in the firm who have billed any time to the client (like we do for preparing the response to an Auditors letter), asking them whether they have or are aware of any relationship with the client. If we are unaware of any relationship, it obviously cannot be an influence on our advice to the compensation committee.