How General Counsel Are Becoming More Essential in the C-Suite

As organizations continue to evolve and grow, so too does the role of the general counsel.  Recent, diverse developments underscore how general counsel are no longer just corporate lawyers but also essential executive officers.

These developments include the emergence and authority of new, non-traditional executive officer positions.  Also new is the willingness of the chief executive officer to take public positions on social issues, and to participate in social media.  In addition, new proposals to repeal the Sarbanes Oxley Act are prompting a reaffirmation of principles of corporate responsibility, and the lawyer’s relationship to corporate governance.

With respect to each of these developments, the general counsel has become the primary resource for executive level involvement and response.  This is consistent with corporate leaders’ increasing acceptance of a broad portfolio for the general counsel, as an “officer for all seasons” in the executive suite–and with a higher organizational profile to match.

New Corporate Officer Titles

The proliferation of new corporate officer positions reflects the need to devote officer roles to increasingly complex operations, as well as to respond to newly recognized best practices.  Titles such as “chief innovation officer,” “chief automation officer,” and “chief diversity officer” reflect this trend.

And there are others: the “chief ecosystem officer” (industry dynamics and business partnerships), the “chief freelance relationships officer” (accessing contingent, temporary, diversified, and freelance employees), and the “chief intellectual property officer” (patent, trademarks, and licenses).[1]

The common theme among most of these new, non-traditional titles is that the cover jobs that (directly or indirectly) implicate legal considerations under the primary jurisdiction of the company’s general counsel.  These include industry regulation, labor and employment law, privacy and cybersecurity regulations, and intellectual property rules.  For example, the typical job description of the chief diversity officer can implicate over 10 different sets of laws and related legal issues, ranging from employee rights and employee benefits to corporate governance.[2]

The feasibility and success of these non-traditional positions ultimately depend on coordination and cooperation with general counsel.  She must ensure that the legal aspects of the duties of this new class of executives are properly fulfilled.  In doing so, the general counsel can rely on skills she developed working with more traditional corporate officers whose duties also have legal aspects, including the human resources director, the chief information security officer, the internal auditor and particularly the chief compliance officer.

CEO Comments on Social Issues

The recent dissolution of  President Trump’s two principal business advisory councils is an example of the emerging willingness of chief executive officers to adopt public positions on matters of social policy.  CEOs fare under increasing pressure from customers, employees, shareholders, and board members to take positions on social or political matters that may implicate their own corporate values.

The New York Times has described this as “part of a broad recasting of the voice of business in the nation’s political and social dialogue, a transformation that has gained momentum in recent years as the country has engaged in fraught debates over everything from climate change to health care.”[3]

Yet such public positioning is not without significant reputational, performance and perhaps legal risk to the CEO and to the company.  Such comments can disturb relationships with the board, confuse other members of the management team, undermine corporate relationships with legislators, and affect consumer preferences.[4]

To advise them on how best to balance the risks and rewards of public commentary, CEOs are turning to their general counsel as a wise counselor and guardian of the corporate reputation.[5]  In this role, the general counsel is by training capable of advising the CEO in the broadest possible context.  She will supplement her technical legal analysis with consideration of applicable moral, ethical, political, economic, and environmental factors.[6]  She will advise not only whether the proposed commentary is legal, but also whether it is the right thing to do, from the perspective of the corporation, its stakeholders, the public and sound policy.[7]

Social Media

CEOs are increasingly considering the benefit of participating in social media such as LinkedIn, Twitter and Facebook.  Social media can help companies cultivate brand perception, enhance customer relationships, increase rapport with employees, recruit and retain millennial-generation talent and demonstrate currency with cultural trends.[8]

Yet, there are risks to CEO participation in social media. They include unfamiliarity with social media protocols, distraction from more traditional duties, employee or consumer misinterpretation of postings as offensive or controversial, cybersecurity breaches, and possible disapproval by the board of directors.[9]

As with public commentary, CEOs are likely to seek the general counsel’s advice before using social media.  The general counsel’s role as wise counselor and guardian of the corporate reputation well positions her as a trusted resource on the use of social media.

Social media also raises distinctly legal risks.  The SEC has in particular closely monitored the relationship between social media use by executives and rules relating to investor disclosure.  Also, communications that include competitively sensitive information can implicate the antitrust laws, and comments interpreted as personally inflammatory can raise libel concerns.  Hence the  need for the general counsel’s advice in her role as legal expert.

The Sarbanes Connection

Another related development has been the recent public focus on the Sarbanes Oxley Act (“the Act”) because of the 15th anniversary of its enactment[10] and emerging efforts to repeal its provisions.[11]  Both events confirm one of the most enduring legacies of the Act: a greatly enhanced recognition of legal counsel (especially the general counsel) as a primary participant in corporate governance.  The Act was the impetus for many of the reporting relationships, ethical obligations, and best practices that link the general counsel to the board.  This is important, since many board members and senior corporate executives are currently held by persons who were not in significant leadership positions when the Act became law–and thus may be unfamiliar with its genesis and its provisions.

The Evolution of “Essentiality”

These new developments serve as the latest step in what has been a gradual expansion of the role of the general counsel over the last 15 years.  This expansion, from technical expert to “essentiality,” has been marked by at least three major milestones.

Perhaps the first was significant monographs published by the American Bar Association and the Bar Association of the City of New York that articulated the benefits of an expanded boardroom role for general counsel.[12]

The next milestone was the thoughtful written commentary of leaders like Benjamin W. Heineman, Jr. (the long-time senior vice president for law and public affairs at General Electric) and E. Norman Veasey (the former Chief Justice of the Delaware Supreme Court), both of whom have thoughtfully explored the challenges of the corporate counsel in a post-Sarbanes Oxley world.[13]

A third milestone was the increasing use of the title “chief legal officer” to identify the position of senior legal advisor for the corporation.  The concept of the CLO has arisen in recent years in response to the increasing organizational and environmental expectations of the senior legal officer position.  While there is no generally accepted definition of CLO, the title is typically meant to bestow greater authority and greater organizational prominence and to signify more involvement in business strategy.[14]

Conclusion

Modern corporate complexity increasingly prompts both the CEO and board leadership to consult with the general counsel when (i) creating new non-traditional officer positions, (ii) contemplating making public comments on major social issues, and (iii) considering using social media in connection with the performance of official duties.  Each of these, and similar evolving business challenges, implicate the broad portfolio of the general counsel and demonstrate the unique “essentiality” of her position.

ENDNOTES

[1] Jared Lindzon, 10 C-Suite Jobs of the Future, Fast Company (July 14, 2015), https://www.fastcompany.com/3048398/10-c-suite-jobs-of-the-future.

[2] Michael W. Peregrine, The Benefits of Coordination Between the Chief Diversity Officer and the General Counsel, Inside Counsel (Aug. 22, 2017) http://www.insidecounsel.com/2017/08/23/the-benefits-of-coordination-between-the-chief-div.

[3] David Gilles, The Moral Voice of Corporate America, The N.Y. Times (Aug. 19, 2017), https://www.nytimes.com/2017/08/19/business/moral-voice-ceos.html?mcubz=3.

[4] Leslie Gaines-Ross, What CEOs Should Know About Speaking Up on Political Issues, Harvard Business Review (Feb. 17, 2017), https://hbr.org/2017/02/what-ceos-should-know-about-speaking-up-on-political-issues.

[5] Ben W. Heineman, Jr., William F. Lee and David B. Wilkins, Lawyers as Professionals and Citizens: Key Roles and Responsibilities in the 21st Century,  (Harvard Law School Center on the Legal Profession), https://clp.law.harvard.edu/assets/Professionalism-Project-Essay_11.20.14.pdf.

[6] American Bar Association, MODEL RULES OF PROFESSIONAL CONDUCT 2.1; Preamble.

[7] FN 5, supra.

[8] Bruce Nolop, Why CEOs Should Steer Clear of Social Media, The Wall St. J (Aug. 13, 2017), https://blogs.wsj.com/experts/2017/08/13/why-ceos-should-steer-clear-of-social-media/.

[9] Id.

[10] Michael W. Peregrine,  Sarbanes-Oxley’s Legacy for Corporate Counsel, Corp. Counsel (July 24, 2017), http://www.corpcounsel.com/id=1202793763906/SarbanesOxleys-Legacy-for-Corporate-Counsel?slreturn=20170818203211.

[11] Gretchen Morgenson, Sarbanes-Oxley, Bemoaned as a Burden, is an Investor’s Ally, The N.Y. Times (Sept. 8, 2017), https://www.nytimes.com/2017/09/08/business/sarbanes-oxley-investors.html?mcubz=3.

[12] American Bar Association, Preliminary Report of the American Bar Association Task Force on Corporate Responsibility, 58 The Business Lawyer 1 (July 16, 2002), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=321701;  New York City Bar, Report of the Task Force on the Lawyer’s Role in Corporate Governance (Nov. 2006), available at http://www.nycbar.org/pdf/report/CORPORATE_GOVERNANCE06.pdf.

[13] FN 4, supra; Ben W. Heineman Jr. “The General Counsel as Lawyer-Statesman”, HARV. LAW SCHOOL PROGRAM ON THE LEGAL PROF.: A BLUE PAPER (2010); E. Norman Veasey and Christine T. Di Guglielmo, Indispensable Counsel: The Chief Legal Officer in the New Reality (Oxford University Press, 2012).

[14] Robin Myers, and Jinn P. Bulava, Chief Legal Officer or  General Counsel? Is there a Difference?, Ass’n of Corp. Counsel (Mar. 26, 2015), http://www.acc.com/vl/public/Article/loader.cfm?csModule=security/getfile&pageid=1396452&recorded=1.

This post comes to us from Michael W. Peregrine, a partner at the law firm of McDermott Will & Emery, who advises corporations, officers, and directors on corporate governance, fiduciary duties, and officer and director liability issues. His views do not necessarily reflect the views of the firm or its clients.

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