General Counsel are One Conscience of the Company

In the February 2013 issue of Corporate Counsel, IBM general counsel Robert Weber makes three points about the independence and stature of in-house lawyers, and a fourth one setting up and then striking down the false idea that inside lawyers should be the conscience of company. (See “Is the GC the Conscience of the Company? Maybe Not”)

Although I agree with much of what he says on independence and stature, I write this comment to disagree strongly with his odd mischaracterization of the inside lawyer’s role relating to corporate integrity—to law, ethics, and values—which runs contrary to the actual experience of those of us who are (or have been) in-house lawyers.

On the “conscience” point, Weber argues:

“I explicitly part company with those who now assert—and there are many—that the general counsel serves as ‘the conscience of the company.’ Few concepts would be as destructive as to the lawyer’s right to sit at the senior table as to place around the lawyer’s neck the millstone of being the company’s ‘conscience’.” [Emphasis added]

Weber goes on to say that the idea of being “the company’s conscience” is “flawed . . . in many respects.” First, he argues, it elevates lawyers to a status above other, talented senior leaders in the company. Second, he asserts: “There is nothing in my training that makes me better or worse suited on matters of conscience than any other senior leader at my company.”

But Weber’s provocative hyperbole and his straw man—he never cites those “many” who argue for lawyer as the conscience—wrongly depicts the reality for 99.9999 percent of inside counsel:

• General counsel are clearly one conscience of the company in a process sense, along with other staff and business leaders. They raise issues for debate and discussion about what the company should do (a normative question!) in many evolving situations where neither law nor ethics are clear. Lawyers are, of course, specifically trained to set out options in the gray areas when the law is uncertain. CFOs have similar primacy of place in presenting options on unclear accounting issues. And, as the law is applied morality, GCs also have a role, along with other key staff, in generating options about what the company should do “beyond what the law requires.” At General Electric, we had a regular process, led by the CFO and GC, for surfacing “ethical” issues for consideration by senior business leadership and, ultimately, the board if approval on major issues was needed (e.g., ethical outsourcing or ceasing to do business in Iran prior to formal sanctions). The right kind of legal training and real practice experience don’t privilege the place of lawyers, but they can give lawyers a strong sense of ethical—not just legal—issues that should be discussed inside a company.
• In contrast to Mr. Weber’s “the conscience of the company” straw man, every general counsel knows that on most hard questions of law and ethics, the CEO and business leaders—or the CEO, business leaders, and the board—will make the substantive decision: will choose among the options generated by the GC and other senior leaders. The general counsel may, in addition to analysis of options, make a recommendation about the desired course of action. But, on major issues, the CEO or board decides. And as substantive deciders, they are the “conscience” of the company.
• Virtually every in-house lawyer also knows that decisions about how to handle complex legal, accounting, or ethical issues are tested against an “enlightened self-interest of the company” standard, and not against some abstract moral principles drawn from some school of moral philosophy. Of course, what is in the “enlightened self-interest” of the company is open to energetic discussion. But, no GC that I know—and I have known a few—would make a recommendation about a hard issue by citing Locke or Kant or Bentham or Rawls rather than arguing why a position is in the best interest of the company.
• In my many writings about general counsel, I have always been careful to say exactly what I have just said above and never to say the GC is the conscience of the corporation. For example, in an essay on “The General Counsel as Lawyer-Statesman” [PDF], I wrote:
  • “The foundational goals of the modern corporation should be the fusion of high performance with high integrity. The ideal of the modern general counsel is a lawyer-statesman who is an acute lawyer, a wise counselor, and company leader and who has a major role assisting the corporation achieve that fundamental fusion which should, indeed, be the foundation of global capitalism.” [Emphasis added]
  • On ethics: “The chief lawyer helps generate issues (by, for example, systematically reviewing claims on the corporation by various stakeholders); determining which ones require in-depth analysis; conducting that analysis under an ‘enlightened self-interest’ standard which understands that ‘costs’ are also ‘investments,’ that ‘benefits’ may be expressed in strictly financial terms but may also require judgment, and that the proper ‘accounting period’ may be years, not just the next quarter.”[Emphasis added]
  • “As a result of this increase in inside talent, the general counsel has become, in many cases, the chief legal advisor to the CEO and to the board of directors, replacing the venerable senior partner from the great law firm . . . .This is not to say lawyers make critical decisions for the company: their primary job is to give the business leaders a range of legitimate options with different degrees of risk and explain pros and cons. Only after acute analysis, integrating all relevant perspectives, should they make recommendations. And, unless the action is unlawful, general counsel, having spoken their piece, should defer to the CEO’s discretion.” [Emphasis added]