Protecting 'You, Inc.': introducing the personal general counsel--an attorney whose primary responsibilities lie in protecting and representing the interests of the individual executive or director.

• Author: Dadakis, John D.
• Position: Liability - Related article: Wealth Transfer: What Smart Families Do

ABRIEF SCAN of today's headlines confirms the obvious: For high-net-worth executives and directors, the legal landscape has never been more threatening. The Sarbanes-Oxley Act and other new corporate governance laws and rulings mean that even supposedly "minor" company events can trigger a Securities and Exchange Commission filing with your name on it. Federal and state prosecutors are suddenly more willing to take corporate leaders to court. So, too, are shareholders. As often as not, it's the person, not the company, who gets caught in the legal crosshairs.

How do you best strike the appropriate balance between personal and corporate interests, safeguard your personal legal position, and protect personal assets?

Not long ago, it was accepted practice to stroll down the hallway to the company's general counsel for legal advice. But executives who believe that conversations with corporate general counsels about business, or even personal, matters are automatically privileged and private in today's environment need to think again.

Consider any one of several recent obstruction of justice trials in the news, where government witnesses have turned out to be the former in-house counsel of an executive's employee. Increasingly, companies are finding it in their best interests to waive attorney-client privilege as part of plea agreements, leaving individuals who were party to sensitive discussions vulnerable to personal liabilities, or even criminal charges. Even something as seemingly unrelated to company business as an unpaid speeding ticket could result in an embarrassing SEC filing if the firm's lawyer decides that his fiduciary obligation to report anything that might affect the company supersedes his personal allegiance to you.

Growing in popularity

Hence the concept of the personal general counsel--an attorney whose primary responsibilities lie in protecting and representing the interests of what I like to call "You, Inc." Those duties include a wide range of matters that confront individual executives or directors along the road to wealth creation: executive or director compensation, tax-minimization strategies, asset protection and transfers, and minimizing potential corporate and personal liabilities.

The growing popularity--and necessity--of personal general counsels should come as no surprise. Individuals have long mimicked corporate uses of outside advisers to help manage investment portfolios or prepare taxes. (Indeed, having a net worth of just $25 million puts one at a level greater than the market capitalization of more than 500 Nasdaq-listed companies.) Much as a corporate entity does, given the risks and complexities of modern-day life it makes sense to engage an attorney who can offer direct personal advice and legal counsel.

That said, not every board member would benefit from a...