General Counsel on the Board
It was once far more common for Boards of Directors to include a lawyer who doubled as general counsel. Some boards still engage their attorney board members as legal consultants. The general counsel is especially busy before board meetings. They are reviewing the agenda to determine whether it involves legal issues or requires adoption of formal resolutions. Most important, perhaps, is the general counsel’s role in making sure that the board meets its fiduciary responsibilities.
In this article, we will briefly look at the question of the general counsel’s place at the boardroom table.
How Involved Should the General Counsel be During Board Meetings?
Unless the general counsel is actually a board member, they have to remember that their presence at board meetings is as staff to the board. Sometimes, the general counsel doesn’t remember this. Then they start engaging in debate on policy aspects as opposed to the legal implications of a given move. It is important for anybody in a board meeting to remember his or her own role.
General counsel can attend board meetings, but they should play a relatively passive role. General counsel on the board is there to observe and to flag issues if they arise. Attending the board meetings helps the general counsel to get a sense of the personalities on the board, the board’s tolerance for risk, and whether it likes to act conservatively or aggressively. Part of the general counsel’s job is to evaluate risks for the organization and help shape its response. General counsel is there to make sure that the board avoids legal problems.
Some boards want nothing more from their lawyer than to answer the questions they may pose and a strict review of legal options. The general counsel’s role at board meetings really depends in part on the management philosophy of the organization.
Where Should a General Counsel0l Draw the Line Between Speaking Up and Staying Quiet at a Board Meeting?
Lawyers and legal issues shouldn’t dominate the decision-making process. The general counsel attends the board meetings to primarily comment on legal issues, and on other issues when requested. Once the general counsel tells the board the advantages and disadvantages, risks and alternatives, and the appropriate legal process to follow regarding a particular issue, then it’s up to the board to pick which way to address the problem in a way that makes the most sense from a business perspective.
In addition, a lawyer who is not a director should not give an opinion on policy unless asked specifically.
What Happens When a Conflict Arises Between General Counsel on the Board and the CEO to Whom the General Counsel Reports?
If there’s something going on that is illegal or clearly not in the best interest of the corporation, and the CEO isn’t reporting it to the board, then general counsel on the board has an obligation to discuss the issue with the board, usually through the chairman of the board. However, it is not the responsibility of legal counsel to go over the CEO’s head and report to the board just because the attorney may disagree with a business judgment the CEO has made. A general counsel must be able to make the distinction between when something is a business decision – such as how much you pay for a service – and when it is a legal issue – such as when you are paying so much it could be considered a kickback.
One other important thing is for the board members to know whether the general counsel is free to raise issues with the board chairman when he or she thinks that the interest of the corporation requires such. The board needs to have the comfort of knowing that the general counsel has ultimate responsibility to the board. This is much like their relationship with the auditors of the company.
Manage Your General Counsel on the Board
For its part, your organization must be prepared to fully brief outside counsel when referring a matter to them. The company must brief the outside lawyer responsible for the matter on what the matter means to the corporation in a business context. Then they must outline the terms of reference for a meaningful communications linkage between the corporation and outside counsel. In other words, fully apprise the outside law firm of the corporation’s information expectations on a particular matter.
If the business manager responsible for the matter wants to be kept abreast of all developments in a matter on a real time basis, then the law firm needs to know this at the point of the initiation of the engagement… Instead of several months later or after complaints by the business manager. In many instances, a company is reluctant to convey this to outside counsel when initiating the engagement. The primary reason for this is because of the cost implications. A high service communications program between outside counsel and its client costs money to implement and administer. But, the costs are invariably incurred, perhaps even at a higher level than might otherwise be the case. This is especially true when the law firm is forced to scramble to respond to ongoing complaints or requests for updates.
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