When should you call separate counsel? Not often, because the board should be able to rely in full confidence on the company's general counsel.

• Author: Raymond, Doug
• Position: LEGAL BRIEF

IT HAS BECOME difficult to escape the drumbeat of reports about the increased risk of liability for corporate boards, as well as for individual directors. According to some, the risk of personal liability for those who serve on a public company board has never been greater. Commentators have offered a long list of suggestions for directors about how to respond in this new climate, including hiring separate and independent counsel on a continuing basis to advise only the board. They express skepticism about whether the corporation's regular lawyers can adequately advise the directors, particularly those who are independent.

Situations do arise in which the board must turn to independent counsel. But in most instances the corporation's inside general counsel, or regular outside counsel, should be able to adequately advise the directors.

Under most circumstances, the corporation's counsel is not the lawyer for the CEO or any other individual officer or director, but represents the entity itself--the corporation. As the board of directors ultimately speaks for the corporation, the corporation's lawyers work for, and are answerable to, the board. Therefore, in general there should not be any inherent conflict. The board should be able to rely on the company's general counsel, who should have the primary responsibility for advising the board and designing and implementing the corporation's procedures for legal compliance.

This is true not only for the board's day-to-day business but also in most other circumstances, including significant transactions such as acquisitions and securities offerings. Inside and regular outside counsel should work together to provide the board with a sufficient basis for approving the transaction and any related disclosure documents.

Effective regular counsel to the board fosters a relationship of trust with the board and can provide an important source of institutional memory. If for any reason the board does not have confidence in the judgment, competence, or integrity of the corporation's legal advisers, it should replace those lawyers with counsel on whom the directors can rely.

In an increasing number of companies, the board has separated the functions of chairman and chief executive officer, not necessarily because of any inherent conflict between these roles but because an independent chairman can bring a different and useful perspective to the board. These companies, and perhaps some others as well, may want...