Letter From The President Of The Greater New York Chapter Of The Association Of Corporate Counsel-America

2004-05-01 00:00

To The Readers Of The Metropolitan Corporate Counsel

In my last letter, I spoke about trust, and how important trust is for corporate counsel to function effectively.Here, I will address the changing roles of the trusted corporate lawyer.Further, I will speak about why discussions of the attorney/client privilege need to adapt to the special roles played by the corporate lawyer.

The changed role for corporate lawyers today depends, in large part, on a change in expectations.Today, the corporate lawyer is expected to perform both advisory and "control" functions within the corporation.To illustrate that view, which is not universally shared among chief legal officers, I ask my doubting professional colleagues to place themselves in the position of the chief executive officer ("CEO").Then, I present a hypothetical situation involving a powerful corporate officer who has a significant influence on earnings, and who confides in corporate counsel that he will not be complying with certain "technical" provisions of law.I then ask, in this hypothetical situation, would you expect corporate counsel to make sure that you, the CEO, were aware of this powerful officer's intentions?In every situation, the respondent answers in the affirmative.This is quite simply information that, when you are in the position of CEO, "you need to know."

What does this show?First, it shows the changing role of corporate counsel.Our powerful corporate officer consults with corporate counsel because he trusts that the lawyer will help him make his business decisions.Assume that our lawyer is smart and has earned respect by providing sound advice through the years.In the hypothetical example, the powerful officer looks to the corporate lawyer for such advice, and the lawyer performs the advisory role well.The powerful officer receives what he wants: sound legal advice concerning the various laws and regulations affecting the business in which he, on behalf of the corporation, is engaging.The problem is that some of those "technicalities" get in the way of a profitable business.

The lawyer's role as "advisor" to the powerful officer, until this point, is without controversy.The lawyer has performed the basic task of advising the officer about various legal requirements and how the officer should comply with them.But, the lawyer has also been informed that the powerful officer is going to "shave" on a few technical points.When we shift the paradigm from the relationship between the powerful officer and the corporate lawyer to the relationship between the CEO and the corporate lawyer, note how the role of the lawyer changes.The CEO's perspective is that the lawyer had better inform him of the powerful officer's intention.The corporate lawyer who meets the CEO's expectation is not acting as an advisor, but as a control person.The purpose of the communication is to afford the CEO an opportunity to stop the powerful officer from acting on his intentions.This is, by the way, what most boards of directors expect of their CEO's.

The example illustrates a situation that occurs regularly at lower levels in the American corporation.While it is a less frequent occurrence at the highest level, the expectation is the same.To serve our corporate client, the corporate lawyer needs to be capable of acting as both advisor and controller.This means that the corporate lawyer must be prepared to be both confidant and cop.The word "cop" is a loaded word, and many corporate counsel resist it passionately.The word does accurately encapsulate the control function, particularly where the CEO in the hypothetical situation countermands the decision by the powerful officer to shave on what is seen to be a technicality.The powerful corporate officer has then experienced a police function, albeit mild.

Many counsel resist any notion that they are policemen, because they see that role as in conflict with their role as advisor.This perception of conflict arises from a failure to identify properly the corporation as the client rather than the corporation's officers.In the hypothetical presented, the corporate lawyer needs to begin as advisor to the powerful officer, and should try to use advocacy skills to bring the officer around to a compliant position.In the end, if unsuccessful with advocacy, the corporate lawyer needs to perform the control function, and inform either the CEO or the highest constituent body in the corporation, the board of directors.In performing the roles of advisor and controller, the corporate lawyer serves his corporate client well.Performance of one role but not the other is deficient.

The second lesson from the hypothetical relates to privilege.The attorney/client privilege in the context of a corporation is different than the privilege with respect to the representation of an individual.In the hypothetical case, when the powerful corporate officer admits to the corporate lawyer that he wishes to violate a "technicality," is that admission part of a privileged communication?The answer depends upon perspective.From the viewpoint of the corporation, the answer may be "yes" if the communication is for the purpose of obtaining legal advice.From the viewpoint of the powerful officer, the answer is clearly "no."The privilege "owner" is the corporate client and not the powerful officer.The powerful officer is entirely unprotected from the consequences that might result from the admission.On the other hand, if the lawyer were not the lawyer for a juridical person, the corporation, but instead was a sole practitioner from whom our powerful officer sought legal advice, the answer to the privilege question would be different.In this situation, the lawyer acts for a natural person, the powerful officer.But that is not our hypothetical case.

Many corporate counsel want their corporate officers to believe that communications between them are entitled to special protection, as if they represented the person instead of the corporation.I have even heard some of my colleagues speak as if the communication were between priest and penitent, or between doctor and patient.It is not.We deceive people who need to trust us if we induce the false perception that what they say to us is subject to a personal privilege.From the perception of the corporate officer, what is said may later be used in a police function, whether the function is an internal policing by the corporation, or an external policing by some governmental agency.A CEO may use it and take adverse action against a corporate officer, including a discharge decision.Furthermore, because of compelling reasons for corporations to cooperate, many will waive their privilege and make the content of communications between corporate officers and corporate lawyers known to the government.Some of these corporate officers go to jail.

Another aspect of privilege relates to the difference in roles.The sole practitioner who is consulted about the law will give the powerful officer advice about his personal legal exposure.This sole practitioner will not have an opportunity or a means to inform the CEO about the content of the communication between lawyer and officer.But the lawyer will also have an ethical obligation to keep his client's confidences secret, which is not the case with corporate counsel.The personal lawyer's role is more limited, and does not require, or even permit, the lawyer to perform an additional "control" or "police" function.Which leads me to my finishing line.When I hear corporate counsel say that they do not want to be "cops," what I hear is that they are unable to perform effectively as corporate counsel.


Thomas C.Baxter, Jr.