IP Draughts has spent much of his career working closely with business clients. His first job was as sole in-house lawyer to a technology-based company. Since he set up his own firm, 25 years ago, he has often acted in a role close to that of an in-house lawyer. For several years, he regularly attended the executive committee meetings of a listed company. He has advised chief executives and finance directors, as well as those responsible for R&D and commercial functions.
But he has never had the job title of General Counsel.
Earlier in his career, he worked for a firm whose partners were sometimes asked to be board directors of their corporate clients. With some exceptions, their policy was that they would act as company secretary, and attend board meetings, but would not be directors. This was partly because of the risk that such a role involved, and partly because of a perceived conflict of interest between the role of adviser and the role of decision-maker.
Increasingly, the role of General Counsel has associated legal duties and risks that have similarities with those of directors. In the USA, scandals such as Enron, and the role of in-house lawyers in its collapse, led to the Sarbanes-Oxley legislation. This places increased, personal duties on in-house lawyers with respect to reporting corporate wrongdoing.
In the UK, there is currently a consultation over whether General Counsel should be regulated by the Financial Conduct Authority under the “senior manager” regime.
There is a view, with which IP Draughts has some sympathy, that introducing regulatory obligations on General Counsel makes it more difficult for them to fulfil their traditional role as an adviser to the Board, or to senior management. If they must disclose matters to regulators, and if their advice is no longer protected by legal privilege, does this inhibit them from giving frank advice? Or does it inhibit senior managers from asking for that advice or disclosing matters to their General Counsel?
As with many issues, IP Draughts thinks the answers to some of these questions come down to people: their values, their expectations of their lawyers, and how they interact with each other. In an ideal world, your CEO gives you very clear guidance, in advance, on what he expects, gives you space to express your disagreements or doubts, supports you in the face of executive criticism that you are blocking deals, allows you to disagree with him or her, and generally acts in an ethical manner. Oh, and your salary and bonus aren’t set by the executives who you sometimes have to say no to. All this would be written down, and would be regularly reinforced by the CEO when dealing with complaints from managers about the in-house lawyer’s “negative attitude”.
But many CEOs probably aren’t that interested in the role of the in-house lawyer or making their life easy. Some may have only a hazy view of what they want from their lawyers. While this is understandable, it can lead to ad-hockery, where situations are judged as they arise. In the heat of the moment, if the in-house lawyer’s advocacy skills are lacking that day, or they have had to say no too many times recently and their stock is low, the wrong decision may be made, or inappropriate pressure may be applied to the in-house lawyer to be a team player. There is no framework of expectations against which to judge the individual situation.
Some in-house lawyers think their role is never to say no. IP Draughts has lost count of the articles he has read from in-house lawyers who proclaim that they are there to find solutions. In some situations, eg finding a way through a blocked commercial negotiation, this is commendable. But when it comes to governance issues or ethical points, in IP Draughts’ view the in-house lawyer should be able to say no on a regular basis. Whether they can or not depends partly on whether they get support from their CEO. And that support counts most when the CEO disagrees with the lawyer’s view.
The publication of the Mueller report has revealed some of the difficulties that an in-house lawyer faces when working for a determined boss who has little sympathy with, shall we say, legal niceties. IP Draughts was particularly struck by the criticism that President Trump is said to have levelled at one of his lawyers who had the extraordinary habit of taking notes.
Not all bosses are like Trump. Some may believe, with justification, that they are generally supportive of their in-house lawyers. But few will probably be interested in establishing the ground rules that IP Draughts would want to see in place before taking on the role of General Counsel in the 21st century.