Trust, transparency and truth are three key elements to a functional relationship between a Board and its Chief Legal Officer (CLO)/General Counsel (GC). For nearly 28 years prior to my role of building highly effective legal teams for our clients at Major, Lindsey & Africa, I served for many years as a GC of both public and private organizations. Through this time, I have experienced the rapidly changing nature and function of this relationship. The role of the GC continues to expand to meet client demands, and the qualifications and skills required for success in the role grow more complex. However, the fundamental elements in this relationship remain.
Perhaps counterintuitively, trust is truly built on the GC’s foundational understanding of the organization’s strategic, commercial/operational and financial matters and how the Board functions to fulfill its obligations to shareholders and oversee executive management. With a keen and in-depth understanding of and involvement in the company’s strategic, commercial/operational and financial challenges, a GC will find it easier to build trust with a Board and successfully fulfil her duties and obligations in her role as legal leader. A legal leader must understand the complex and often nuanced intersection of these key corporate issues and her specific expertise as GC in areas, for example, like legal compliance, corporate and Board governance, enterprise risk management, shareholder matters, as well as issues requiring increasingly greater oversight from the GC that include environmental, social and governance matters. A Board trusts a strategic GC.
Transparency requires several key initiatives between GC and Board. And a successful GC and Board should welcome these key structural integrations into their relationship. Most importantly, an open line of communication should always exist between the Board and GC, supported by the CEO. Certainly, this type of communication involves matters of risk and reporting handled by the Audit Committee. This includes executive compensation and corporate compensation plan issues requiring approval and administration by the Compensation Committee as well as Board composition, committee, calendar responsibility and broader governance matters overseen by the Nominating and Governance Committee. But communication surrounding Enterprise Risk Management (ERM) may be managed by a separate Risk Committee or the Board as a whole. The Board should require the GC to provide counsel in newer or rapidly evolving areas of the legal and regulatory landscape such as ESG, data privacy, cyber security and AI regulatory matters where the Company is involved. These dialogues and avenues of open communication should certainly occur in regular Board and Committee meetings attended by the GC, but also should occur ad hoc, where the GC and Board members have also more informal opportunities to build working relationships. Specific communication requirements for the GC and Board should involve regular presentations and open &A in meetings, as well as regularly scheduled Board and Committee executive sessions where the GC, who may also serve as Chief Compliance Officer, has the opportunity, like a company’s outside auditors or head of internal audit, to share and discuss certain key matters under the protection of the attorney-client privilege. Complete transparency is key to a successful Board and GC relationship.
Finally, a GC is duty-bound to speak truth to power, always! The heart of a healthy relationship between GC and Board is truth, and truth has several elements. In being truthful, a GC must exhibit candor. Candor involves being completely forthright, fair and free in delivering counsel. In being truthful, a GC must speak with accuracy. This means, she much be factually correct, clear and exact in her communication. In being truthful, a GC must be complete. In order to be complete, a GC must identify all necessary facts or elements and speak thoroughly of an issue to the Board. At a minimum, truth includes full candor, accuracy and completeness and is essential to the GC and Board relationship. In this regard, and understanding the general best practice is for the GC/CLO to report to the CEO, the GC/CLO occupies a very special place in executive leadership as an attorney. The Board, CEO and other members of executive management must have a crystal-clear understanding of the duties, responsibilities and obligations owed under the attorney-client relationship, how the Board fits into this relationship and how the ultimate client is the organization itself. Given also the Board’s duties and obligations, the GC/CLO, without any attempt to legally expand her client duties, must speak the truth.
A relationship of trust, transparency and truth between GC and Board may seem elementary. However, the road to this result is not easy. A relationship of this nature and importance takes time and tremendous effort. And achieving these goals continues to gain complexity in the current corporate environment. But GC’s must insist on nothing less with the Board. And remember, the legal department and GC as its leader must demonstrate through this relationship and objective metrics, increasing value to the organization and shareholders as a key strategic and cultural driver, as well as builder and defender of integrity and the business reputation of the company.
For the GC to have this relationship with a Board, she must first have it with her fellow executives and CEO. Proactively manage these key elements. And as a GC, and likely Corporate Secretary, help your Board with issues of its own composition, assessment and training, as well as its obligations. Finally, have tremendous grit, stamina and courage! You will succeed!