The Dual Role of Corporate Counsel Serving on the Board of Directors
| Publication year | 1984 |
| Pages | 792 |
| Citation | Vol. 13 No. 5 Pg. 792 |
1984, May, Pg. 792. The Dual Role of Corporate Counsel Serving on the Board of Directors
The issue of general counsel of a corporation also assuming a position as a member of the board of directors of the same corporation is a provocative one. The topic has been discussed by many commentators and recently was addressed in this column.(fn1)
The bulk of the literature reveals a negative bias to this proposition and frequently an attitude of, "Do as I say, not as I do." Much of the discussion, however, fails to take cognizance of the facts of modern corporate existence. There is a need to look beyond merely the reasons against the dual role. An analysis of this issue must involve the realities of the corporate world and the benefits of serving in the dual capacity of lawyer and director. This article explores the positive aspects of the dual role, as well as some of the problematic areas and methods of minimizing them.
The practice of having corporate counsel serve on the corporate client's board is quite common.(fn2) A survey conducted by the Journal of Corporation Law was consistent with previous investigations showing that 65.7 percent of the corporations that responded to the survey have had corporate counsel serve on their boards.(fn3) In addition, it was found that management and attorneys did not differ significantly in their support of the practice.
Obviously, the corporate client believes that there are benefits for an attorney assuming such a dual role. Some of these benefits are as follows: increased knowledge of corporate business, enabling the lawyer-director to give more meaningful legal advice; ability to better practice preventative law; enhanced communication within the corporation, thus strengthening the board; and increased influence and effectiveness due to the increased status of the director role. These benefits result in the lawyer-director being more effective in both capacities, as lawyer and as director.
The director role complements the counsel role in several ways. A lawyer, by virtue of his role as director, gains knowledge and insight into management of the corporation which he would not gain solely as counsel. This allows him to give more meaningful legal advice(fn4) and alerts him to problems at an early stage so that he can give appropriate warning.(fn5) The importance of legal ramifications in management decisions cannot be underestimated; a lawyer-director brings the necessary experience and training to recognize the legal implications of proposed board actions and strategies while in a formative context.
Also, the lawyer-director role clearly makes the attorney more accessible to members of the board. It gives counsel a direct line to the board members, thus enhancing communication. This exchange of information and knowledge obtained through interaction of the directors strengthens the board and leads to better management of the corporation. Counsel's legal knowledge, when combined with the increased information regarding corporate affairs, allows the lawyer-director to function as an informed monitor more readily than other directors.(fn6)
The attorney's membership on the board places him in a position of equality in dealing with senior management, which gives added weight to his opinions and views.(fn7) His ability to practice preventative law is thereby improved, since he is in an informed position and on equal footing with those who make corporate decisions, including management and the board of directors.(fn8) Other directors are more likely to heed the advice of a fellow-director who is a lawyer for the corporation when they know that he shares their responsibility as a director.(fn9) Also, the higher liability risks confronting a lawyer-director create a greater incentive to know the corporation's business and to be sure that problems are handled in a careful and appropriate way. This generates a stronger commitment to the client corporation.(fn10)
The need for the dual role is manifested when outside counsel's position is contrasted to that of inside (in-house) counsel. In-house counsel has...
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