The Point

Recently a member of a West Coast media company’s board of directors asked me this question: Our CEO wants to reduce the number of his 13 direct reports, one of whom is the General Counsel. What do you think of having the General Counsel report to the Chief Operating Officer?

I replied that “Legal” has two very different responsibilities — and reporting relationships between the corporate law function and the C-Suite should should be structured accordingly.

This Matters to Your Business

Legal’s two very different responsibilities:

1. To provide sound legal judgment to guide the CEO’s business decisions. This isn’t about a “reporting” relationship at all. And it goes beyond a “General Counsel” or any other individual attorney. It’s about getting the right lawyer to advise on the particular decision the CEO faces. And — in a legal system that requires increasingly specialized expertise — often that’s someone other than the General Counsel.
2. To manage the corporate law function’s people, operations, and budget . This requires a proven manager. And it calls for a reporting relationship with a senior executive who can get from that proven manager real accountability for results. Like, perhaps, the Chief Operating Officer the board member asked me about (a CEO might have the proven management capability, but generally does not have the bandwidth).

Because …

The standard lawyer viewpoint: the General Counsel should always report directly to the CEO, and that General Counsel should automatically have management authority over Legal’s people, operations, and budget. (Regardless of the fact that law schools don’t teach management, and more importantly, the fact that the vast majority of general counsel have no professional experience outside law firm and in-house counsel duties, and have never managed a corporate function or business unit).

…

In this era of skyrocketing litigation and regulatory demands on business, Legal needs to do more with less. Specifically, it needs to scale up its capabilities, rather than simply add more attorneys from law firms or in-house.

Meanwhile, alongside this demand growth, the CEO and others require what has always been required of the corporate law function: one-on-one advice from an extremely capable lawyer. Given the complexity of law in 2022, and the business stakes of getting it right, this increasingly means getting specialist lawyers to advise the CEO. Rather than relying solely, or even primarily, on the General Counsel.

So …

My board member colleague’s CEO with 13 direct reports nevertheless needs to spend lots of quality time with the best lawyers available for the high-stakes decisions he or she must make — whether those lawyers have the title “General Counsel” or not. And such decisions will be more likely to require an outside specialist’s acumen. (Again, this CEO-Legal connection is about supporting the CEO with the right legal advice. It has nothing to do with a “reporting” relationship.)

As to management of the people, operations, and budget comprising the corporate law function, this calls for a firm hand from a proven manager, who is made accountable to, and receives guidance from, another proven manager. Not an attorney whose entire career has been confined to giving legal advice. And not a CEO whose bandwidth is insufficient to a robust reporting relationship.

I practiced law for over 2 decades, and served as a general manager running divisions at Whirlpool Financial and then as an M&A executive at GE, for over 12 years. Excellent legal judgment, on one hand, and effective management, on the other, are skill sets rarely found in the same individual. For the former, one needs proficient lawyer-advisors. For the latter, proven executives. And bureaucratic maxims like “the General Counsel should always report to the CEO” miss the point.