Canadian Lawyer InHouse

feel better positioned as a general coun- sel when I know what's going on in the various aspects of our business — there shouldn't be any surprises that way." In a smaller organization it's probably easier to manage and in some cases the general counsel will assume compliance responsibilities. Georges Dessaulles is a compliance and business ethics consultant who was with RBC before retiring two years ago. He says the compliance function is con- tinually evolving. "There are all kinds of models for compliance and it's a mov- ing target," he says. "Historically, compli- ance in the banks reported to the general counsel's office and had its own function and independence but ultimately reported to the general counsel." Dessaulles says compliance has now matured to the point where in most organizations it is a stand- alone function and equal to, if not more important than, the legal function. Smaller companies may not be able to afford a separate compliance function and general counsel will have respon- sibility for both, but it can make their life a bit difficult. "You have to be aware the roles are different and issues can arise that require them to wear one hat more than another," says Dessaulles. "It won't be a problem if you have the right person — you have to have backbone — you can't be a general counsel who always wants to please the business unit; there will be times you will disagree." In a small in-house department where the general counsel is flying solo or with only a small support staff in place, jug- gling compliance and legal matters may be required of them. In large organiza- tions the roles of general counsel and compliance may need to stay separate, says Boscariol. "I think the trend we're seeing is there is a focus on appointing a chief compliance officer that is separate from your general counsel because of perceived conflicts." John Williams, a Calgary-based part- ner with KPMG LLP, has worked with audit committees and boards as well as in-house counsel. "More often than not when we get involved with the GC it's on a reactive basis because there's been a problem," says Williams. Often, it has been a situation when a senior-level executive has engaged in some inappro- priate behaviour such as a form of fraud or other financial misconduct and it often involves a call to a forensic accountant. Williams says he can see Canadian in- house counsel following on a trend that's been developing in the United States in which general counsel are working more closely with internal audit functions, com- pliance executives, and monitoring officers. He says large U.S. corporations are setting up compliance officers in cities where they have major subsidiaries. "My sense is that for the most part the people who are now fulfilling those roles are lawyers," he says. Those lawyers are mandated to ensure that employees are complying with cor- porate initiatives such as whistleblowing mechanisms, anti-bribery and anti-cor- ruption policies, as well as concerns over financial reporting or various risk-man- agement issues. "What I think is emerging out of the U.S. is the GC's office is taking more of a proactive role to ensure there are proper governance structures put in place to jointly address the culture of the organization, to make sure people under- stand how they can report their concerns, and make sure the mechanisms are in place to give assurance to anybody who wants to report a concern that it's a retri- bution-free environment," says Williams. "Of course there's always a caveat that if someone does it with a malicious intent all bets are off." From his vantage point, Williams says the role of GC has expanded significantly since 2004. "They're becoming more criti- cal in terms of ensuring that corporations are setting the proper tone and satisfy- ing their statutory obligations in terms of compliance." In fact, he says, general counsel hold a unique position in an organization. "More often than not, gen- eral counsel can stay above the fray. The ones I know don't let emotion creep into their decision-making and are generally effective in steering the corporation down the right path, making sure they don't stray ethically with difficult situations, and holding everyone else to a higher standard." Dessaulles says the general counsel can wear two hats. "It shouldn't be a conflict — for example, in the banks the compliance and legal functions are very closely related and work closely together." If you're general counsel and don't have a separate person handling compliance and you find yourself in a situation being pressured to do something you don't feel is right you have to stand up and be counted. In that kind of circumstance Dessaulles says the general counsel has to evaluate whether to go with the business or say no and refer it up the line to someone more senior to make the decision. "You have to go beyond the business unit. If the general counsel is going to take a position that dis- agrees with the business unit, it will have to go to the next level. I think the general counsel today tends to report to a fairly senior officer in the company." Williams says there needs to be a healthy culture of openness in an organi- zation for compliance to work smoothly and for proper information exchange to happen. "It's tough for in-house counsel to be in charge of the internal controls but where they can be great is in the role of making sure the organization is in full control of all the compliance issues and statutes and working on a culture of compliance. From there, once it gets into the DNA of the organization, it doesn't mean things won't happen but it really minimizes a catastrophic loss." Success also depends on the maturity of the organization, says Dessaulles, add- ing it depends a lot on whether the com- pany has truly accepted the GC as part of senior management. "If the GC is just a functional lawyer hired to do contract work then it may not work, but if general counsel is seen as part of senior manage- ment and as somebody there to keep the company out of trouble then yes, it can and should work." Adams says each company has weigh its own risk tolerance. "At the end of the day it's not about doing something that's not compliant, it's a matter of assess- ing a priority to something. Take Dodd- Frank — everyone is going to make sure they are compliant with everything in Dodd-Frank given the importance of it, but there are other areas, too. Compliance is not just about compliance with law but in our business complying with what your clients are telling you what their personal rules are." IH INHOUSE APRIL 2012 • 35 to

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