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General Counsel on the Board

See Also:
Ten In-House Secrets for Reducing Your Company’s Legal Costs
Red Herring
Board of Directors
Benefits of an Advisory Board
How to Form an Advisory Board

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.


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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

The general counsel, if well utilized, should be working with senior management and the board chairman to come up with continuing education for the board on legal issues affecting the company.

TIPS ON HOW TO MANAGE YOUR LAWYER

Your company must disclose to your outside lawyer its communications needs upfront!

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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Ten In-house Secrets For Reducing Your Company’s Legal Costs

See Also:
Tips on How to Manage Your Lawyer
What Relationship Should the General Counsel Have With the Board
How to Keep Your Corporate Veil Closed
Corporate Veil
Sunk Costs
Bankruptcy Costs

Ten In-house Secrets For Reducing Your Company’s Legal Costs

General Counsel,’ or “Chief Legal Officer,” is the job title of the lawyer who heads up the legal department in a corporation. As former general counsel of a small oil and gas company, as well as the assistant general counsel of two Fortune 100 corporations with annual sales exceeding a billion dollars per year, my job involved delivering and managing in-house legal services, managing external law firms, and contributing to corporate strategy. However, much of my time was occupied with finding ways to reduce your company’s legal costs.

Major corporations need a full-time general counsel, and supporting legal staff made up of other in-house lawyers and supporting administrative staff. However, smaller growth emerging companies may not have the luxury and the resources to hire such legal support. This article will assist you in developing legal management principles that can reduce cost and increase efficiency in your business. The primary goals of managing legal costs include the following:

  • Negotiating the cost per hour of a lawyer’s time
  • Reducing the number of hours of lawyer time required by the Company for external lawyers

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Reducing The Cost Per Hour for Legal Services

1. Recognize the ‘In-House’ Advantages

Corporations with in-house lawyers typically generate internal legal services at a cost per unit of time lower than hourly rates of external law firms. When legal services are delivered on-site, the lawyer becomes a familiar face, and can learn a lot about the company and the overall strategy of its management team. This makes it easier for the in-house lawyer to give pro-active advice that is in line with the company’s corporate strategy and business objectives. Having one lawyer responsible for delivery and management of all company legal requirements gives continuity critical to strategy implementation and facilitates cost management of the legal function.

2. Identify Legal Work Critical to the Strategy of the Company

Identify legal work critical to the core mission or strategy of the Company. Target doing it on an ‘in-house’ basis. As in other skill areas, the approach of ‘new economycompanies is to hire for core mission critical and strategy requirements. Then outsource the rest.

3. Recognize the Requirements of the Job and Obtain the Skills Needed

The ability to perform legal services at a high performance level is the primary basis of evaluation for a potential in-house counsel. Just as important are the in-house counsel’s ability to source and manage legal requirements that exceed his or her geographic, skill or time limitations. A third quality that you should desire in an in-house counsel is the ability to design and deliver internal legal liability reduction programs. They should accomplish this by creating standardized practices, materials, and processes aimed at reducing the Company’s legal costs over time. They should also reduce any potential legal liability, or risks, as the Company pursues its business goals and objectives.

4. Calculate Your Company’s Legal Costs

This requires adding up all of your legal bills for the previous year AND estimating the cost of productive executive time lost due to involvement in, concern about, or management of legal issues. Now you have identified the value of managing the Company’s legal environment. Adjust this amount upward or downward to reflect how you expect the current year’s business activity, and legal activity, to compare to the past year for the same activity. You can label the adjusted amount as your Company’s ‘projected legal costs.’

5. Assess the Cost of ‘In-House’ Employee vs External Lawyer ‘A La Carte’

Assess the cost of bringing a full-time lawyer on board as an employee (‘in-house’ employee cost). Then compare the cost to buying legal services from an external lawyer ‘a la carte.’ Recognize the value of educational, business, legal, ‘in-house’ and management experience and skills necessary to do the legal job for the Company as it is now and as you plan it to be in the future. Remember technical and industry knowledge may be important candidate factors. The fully loaded ‘in-house’ employee cost for an in-house lawyer recognizes lawyer recruitment fees, salary, executive benefits, support staff, allocated office space, office furniture, equipment, law library and electronic legal research costs, law society and practice insurance annual fees, and costs of ongoing legal education courses. If there is a risk that the newly hired in-house lawyer will not work out, then an allowance for costs of severance is prudent.

6. Compare the Projected Legal Costs to the Fully-Loaded ‘In-House’ Employee Cost

Make sure that you compare ‘apples to apples’. Avoid the “pitfall” of hiring an in-house lawyer that is too junior to do the job that you need done. This could be because of lack of experience, skills and knowledge. This could actually increase your Company’s costs because of the need to use external lawyers to supplement the work of your under skilled in-house lawyer. Of course, the more junior a lawyer is in experience level, the lower their salary for employment. But all other costs (which usually exceed salary) are more or less the same regardless of experience level of the lawyer employed.

7. Consider Permanent Outsourcing

If a new full-time ‘in-house’ employee is not in your Company’s current plans, due to staffing freezes, lack of desired flexibility, or other reasons, consider going for the ‘in-house’ advantages by permanent outsourcing. Some common benefits identified for outsourcing legal services for your Company include the following:

(a) strategic benefits such as an ability to focus company resources on its core business, access to better, and more efficient, technology
(b) operational benefits such as access to legal expertise, and experience, not otherwise available in the marketplace, scalable solutions, increased accountability
(c) financial benefits such as cost reduction and the “freeing-up” of capital for key projects

8. Consider Outsourcing

If you do not require a ‘full time equivalent’ for your company’s mission-critical and strategic legal work, then consider outsourcing. Outsourced legal services provide an opportunity to buy the services you need on a flexible, scalable basis. For example, The Phillips Law Group offers experienced in-house lawyers on a flexible schedule based on your Company’s legal requirements; such schedule can include a morning a week to full time. The services for such in-house lawyers can be priced on an hourly fee arrangement. They can also be priced on an alternative billing arrangement, such as target-fees, monthly retainer, project fees, or other basis. They work on-site at your premises. The pricing model reflects aggressive use of labor-saving technology and a belief that your Company should not pay any more for legal services than that which is absolutely necessary.

Reducing The Quantity Of Legal Services Required

9. Divide Your Company’s Legal Functions into Four Categories

Divide your Company’s legal functions into the following four categories:

  • Maintenance-related
  • Avoidable,
  • Transaction-related
  • Crisis-related

Then adopt management plans for each of those categories. Avoidable legal expenses are those that can be reduced through training employees responsible for causing them. An example would be targeting reduction of wrongful dismissal lawsuits by developing standard Company employment contracts and providing related training to the human resources staff.

10. Develop Standardized Materials and Procedures to Delegate Low-Level Legal Functions

Develop standardized materials and procedures to delegate low-level legal functions to business staff. Then have a lawyer monitor those functions. Functions relating to the Company’s compliance status and asset maintenance (e.g. routine procurement contracts, company and securities compliance filings, trademark and patent renewals) may offer a substantial opportunity to save money. Completion and return of standard forms can be delegated to trained staff and then monitored by a lawyer. Your Company can develop a process to review all patents and trademarks. Make sure that the Company is exploiting them, or has a potential use or revenue from each, before spending money to renew registrations.

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See related article:
Tips on How to Manage Your Lawyer

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