Editorial Reply – Taking Issue with “The Association Between Corporate General Counsel and Firm Credit Risk”

As CEO of the Association of Corporate Counsel (and former in-house lawyer), I take issue with the mischaracterization of the association’s 2015 Chief Legal Officers Survey. While it’s true that the role has evolved, it’s wrong to suggest that chief legal officers (CLOs) are abdicating their responsibility as the company’s legal and regulatory point person.

The evolution of the role of general counsel (GC) coincides with the evolving role of CFOs and every other C-suite executive to be more strategically-focused and astute to understand the business and operations. The truth is, most general counsel prize being a confidante and respected member of senior management because increased access enables them to provide more effective legal counsel — to both contribute to strategy as well as “gatekeep” from the inside. The two roles are not mutually exclusive and I believe that misunderstanding flaws the author’s underlying premise.

It’s naive to suggest that corporate scandals like Enron and WorldComm could have been prevented by a lawyer gatekeeper. Enron was a classic case of executive greed and arrogance where deceptive trading practices and fraudulent accounting methods enabled the company to torpedo the investing public, its employees and stakeholders. WorldComm’s demise was the result of improper accounting and financial fraud — almost $4 billion in mischaracterized expenses, overinflated revenue and financial misrepresentation. These scandals were rooted in ethically-challenged chief financial officers (CFOs) and accountants who skirted their financial reporting responsibilities, along with executives who were too focused on the value of their stock options and padding their own fortunes.

As accounting professors, the authors would likely agree that today’s CFOs have moved from being the company’s chief accounting and financial reporting executive to taking on operational responsibility and serving as outwardly facing spokespersons, with many CFOs harboring upwardly mobile ambitions of one day becoming the CEO. Following the author’s logic, would instances of corporate malfeasance be averted if the CFOs and accountants would just “stay in their financial lane” and refrain from contributing to strategy, or if executive compensation schemes would just cease to offer stock or stock options? While we are at it, let’s blame today’s data breaches on the evolving role of technology and CTOs who should stop trying so hard to contribute to corporate strategy and just stick to cybersecurity.

With the myriad challenges faced by executives and boards of multi-national companies doing business globally, it is no surprise that they look to all savvy corporate executives, including the GC, to offer the full extent of his/her knowledge and experience to contribute to corporate strategy. The fact that a CFO, CTO, CAO or CLO is capable of contributing more than his or her stated responsibilities (and does) should not be used as a basis for alleging he/she would fail to discharge a primary responsibility.

Unlike in academia, the business world and one’s executive role cannot be easily reduced to narrow one-dimensional subject matter areas or courses. The best executives know how to contribute across the spectrum without losing sight of the unique knowledge and training that they were hired to bring to the table, whether that might be legal/regulatory, technology or finance.

The preceding post is a response provided by the CEO of The Association of Corporate Counsel to an empirical study discussed in an earlier post on this blog.  About ACC: The Association of Corporate Counsel (ACC) is a global legal association that promotes the common professional and business interests of in-house counsel who work for corporations, associations and other private-sector organizations through information, education, networking opportunities and advocacy initiatives. With more than 40,000 members in 85 countries, employed by over 10,000 organizations, ACC connects its members to the people and resources necessary for both personal and professional growth. By in-house counsel, for in-house counsel.® For more information, visit www.acc.com and follow ACC on Twitter: @ACCinhouse.