Marginalization of counsel … and compliance officers

Years ago, a firm I knew moved its chief compliance officer from a relatively nice office to a decidedly not nice one.  The move was intended to send a message and it was received that way. I noted at the time that this would not end well for the firm. Sadly, I turned out to be right.

In a recent post on the Harvard Corporate Governance Blog, “Bernie Ebbers and Board Oversight of the Office of Legal Affairs,”  Michael W. Peregrine, McDermott Will & Emery LLP  revisits the once-famous World Com accounting fraud scandal from the early 2000s and particularly the aspect of it that entailed the CEO (Ebbers) marginalizing corporate counsel. The details of this matter are less important (to me) than are the author’s very useful recommendations for mitigating this sort of risk.

Here are a few – of many:

1.Providing periodic board education on the nature of the general counsel’s role as counsel to both the board and management.

3.Incorporating in the general counsel’s job description the role of promoting compliance with the law and ethical standards.

10.Giving the general counsel access to, and collaboration with, other corporate executives with risk, audit and compliance portfolios.

12.Providing for general counsel participation in periodic executive session meetings with independent directors.

13.Establishing effective reporting relationships between general counsel and the in-house counsel assigned to corporate subsidiaries.

14.Assuring participation by appropriately senior in-house counsel in board, committee and management meetings relating to risk, legal or compliance matters.

15.Identifying members of the internal legal team to whom employees may confidentially address concerns.

16.Confirming that compensation of the general counsel is not determined in a way that might reasonably be considered to compromise the independence of its legal advice.

Of course, most of these questions can – with some modification – be asked about a company’s chief compliance officer, as well as its general counsel. And in conducting program assessments one should consider identifying and addressing marginalization in both roles.

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