All Companies Need a General Counsel–part 1

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Whether Outsourced or In-House, a General Counsel Who Pushes Back Against Unwise Business Decisions Is Invaluable

Regardless whether a company relies on inside or outside counsel or some combination thereof, every company should have one lawyer who acts as general counsel with overall responsibility for the legal function.  Every company will value a general counsel who has technical expertise, but what every business manager needs is a counsel who will push back and use independent judgment when the client has presented a course of action that the lawyer thinks is unwise.

A general counsel interfaces with senior management over strategy, growth, risk protection, budget, planning and operations.  The American Corporate Counsel Association (ACCA) identified four goals for the general counsel:

  1. be aware of the big corporate picture and understand the wider, cumulative and aggregate risk consequences for the company of management decisions;
  2. maintain a separate corporation-wide information flow that counterbalances the information flow upward to the CEO and Board of Directors;
  3. must be viewed as a person who helps guide the chief executive to do the right thing, and
  4. adopt a risk assessment approach.

For companies that have received funding and are gaining significant revenue growth, usually the funding is spent on marketing, programmers, sales, rather than functions such as HR, finance, accounting.  As a result, the company will experience increased inefficiencies.  The company should outsource the general counsel role and retain one lawyer who helps organize the business practices, develops practices and policies and assesses risks.

Many companies will realize the need for the general counsel after they have had their first major litigation experience.  Every legal dispute has an underlying business problem, but usually after business managers have the experience of the irrationality and uncontrollable nature of litigation, there is a decision made to retain a part-time general counsel to better anticipate and assist in resolution of litigation, and if no resolution is possible, to manage the ongoing litigation.

In the next installment, I will set forth the results of a survey conducted by ACCA regarding the most important roles of the General Counsel.


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