Canadian Lawyer InHouse

By Ken Fredeen The intersection of governance and the general counsel Understanding how to effectively be the 'someone in the lonely middle.' I nformation overload but no time to read. That is the dilemma we face. But there is one book you must get your hands on: Indis- pensable Counsel: The Chief Legal Officer in the New Reality by E. Nor- man Veasey. It is not only the prod- uct of considerable research including numerous general counsel interviews, but it follows from his fascination with the role after serving as a respected Del- aware judge and now acting as a senior partner at a large New York-based law firm, Weil Gotshal & Manges LLP. Veasey provides governance-related advice to some of the world's largest corporations, and it is the intersection between corporate governance and the roles and responsibilities of the general counsel, which attracts my attention for this column. Corporate governance will contin- ue to be in the spotlight. Challenging times stress an organization's gover- nance, highlighting both strengths and weaknesses. Our role in corporate gov- ernance is perhaps more significant than most of us recognize, particularly in times of crisis or adversity. Some of you will recall the pain associated with getting struck at the governance intersection. A couple of years ago I had the good fortune of listening to a panel of senior U.S. directors reflecting on what their expectations as board members were for the role of general counsel. One of 38 • APRIL 2012 INHOUSE the significant attributes they required was independence from management, or as Veasey calls it, objectivity. After the panel, I put a question to one of the panel members who was also the longest-serving independent director on some of America's most significant corporate boards: How does the board assess a general counsel's independence or objectivity? Her answer surprised me, though as I thought about it, maybe it shouldn't have. The assessment is a subjective one, which occurs over time as they get to observe and interact with the general counsel. The panel preceded a day of break- out sessions for general counsel and to her credit, she sat through the sessions and listened. Her reflections to us at the end of the day were insightful. She sim- ply told the group that she had no idea of the challenges and issues we faced as general counsel. No doubt she is a better director for having spent the day with us, and no doubt she understands how a general counsel plays a unique role in governance. Veasey devotes more than 50 pages to the exploration of what he titles The Lonely Middle: Relationships with Senior Management and the Board. Putting it succinctly, one of the general counsel is quoted as saying "You cannot be effective with management unless you are trusted, but you cannot do your job as general counsel unless you are independent," a quote which is as complex as it is brief. The evaluation of a general counsel's ability to give independent advice to the board should not be left to a subjec- tive evaluation, though that is impor- tant. For instance, the general counsel needs face time with board members particularly at board and committee meetings. The general counsel needs to develop relationships with members of the board so as to build the trust the board needs. By the same token, man- agement must respect the general coun- sel's unique role related to governance. But Veasey would go further and I agree with him. It is about structure and process. The CEO controls the selec- tion, hiring, firing, and compensation of the general counsel. An important structural enhancement to protecting the vital independence of the general counsel is that the board should have a role in the hiring, firing, and compen- sation of the general counsel. It goes without saying that the very time an organization needs to hear from the general counsel, is the time she might be let go and the board needs to under- stand and be part of the exiting process. After all, there is a clear alignment of interests at the intersection of gover- nance and the role of general counsel. I have learned an effective general counsel has learned how to build rela- tionships, trust, and respect within an organization on both sides of the gov- ernance fence. It is not always easy, but to be effective they have learned that strong, respectful relationships result in being able to navigate through the gov- ernance waters particularly in difficult times. But to be truly effective, they need more and the board has a role to play to ensure there are institutional and struc- tural safeguards for what Veasey calls 'someone in the lonely middle.' IH Ken Fredeen is general counsel with Deloitte & Touche LLP in Toronto. He can be reached at kfredeen@deloitte.ca.

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