Disagree: there is no driving mandate for a legal director.

• Author: Okamoto, Karl S.
• Position: BOARD COMPOSITION

BEING A FELLOW LAWYER, I am sympathetic to Gary Schmidt's argument. CEOs have always been favorites for board seats. With the adoption of Sarbanes-Oxley and its requirement of a "financial expert," CFOs have found their spots on the A list. So with the plethora of new corporate governance and other regulation, shouldn't it be the general counsels' turn? I am sympathetic, but I am not convinced.

The core of Mr. Schmidt's claim is that the addition of a board member with a general counsel's skill set would improve the overall functioning of the board by alleviating other board members of the distraction of managing the "corporate governance process and myriad of legal commitments." This new "legal director" would serve this function by providing "important insights and expertise" and "help[ing] independent board members perform all of their corporate governance obligations." Mr. Schmidt stresses that this legal director would not supplant the role of company counsel. But nevertheless, he envisions that the non-lawyer board members would be able to rely on this lawyer-member for overseeing the management of the various legal and regulatory issues they face as a board.

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In his depiction of this new type of director, Mr. Schmidt assumes a very practical, and I would say realistic, picture of how boards get their work done. There is no doubt that a well-functioning board often divides up the work, relying on committees or individual board members with particular expertise to shoulder the lion's share of any given burden. The most obvious example, one to which Mr. Schmidt refers, is the audit committee. While a board as a whole bears responsibility for the system of financial reporting and controls on which it and its shareholders rely, it delegates to a smaller subset of its members and the so-called "financial experts" among them the minutiae of overseeing and managing that system. Likewise, he argues, boards should give...