General Counsel in the Hot Seat
from July/August 2007
The forced departures of the general counsel from such household-name companies as Apple Inc. and Hewlett-Packard Co. prove that in matters of corporate conscience and ethical conduct, the buck stops where the guidance starts—in the office of the top attorney. The scandals at Enron, HealthSouth, and the like were the result of financial chicanery, but these more recent ones often stemmed from a GC’s failure to speak out against ethical lapses. Apple’s GC, Nancy Heinen, quit in the wake of the option-backdating scandals that hit several companies. Her counterpart at Hewlett-Packard, Ann Baskins, was involved in the HP spying case. The GC of Bristol-Myers Squibb left soon after the FBI started an investigation into allegations that the drugmaker had conspired to keep a generic version of one of its bestsellers off the market. The lesson for general counsel everywhere: However good your intentions, a single error of judgment can reduce your company to a laughingstock or worse, and it could cost you your job.
Boards set policy, but the general counsel guide directors on legal and ethical issues. Board members need to view their GC as the front-line extension of their governance and oversight capabilities, someone who can ensure that their policies are implemented at all levels of the company. Remember, the new scrutiny general counsel are getting from activists and reformers comes on top of dealing with their normal adversaries—greedy plaintiffs, corporate raiders, and the like. A GC must help the board formulate a strategy against all kinds of contingencies. For its part, the board must understand that most corporate crises do not lend themselves to a magic-bullet solution that produces an instant and unambiguous victory.
A general counsel is the company’s conscience and must be comfortable making waves—and enemies, even—especially since his responsibilities include playing a key role in fraud prevention. The GC must be discreet, whether dealing with high-level corporate negotiations or handling sensitive information about company executives. Often, most painfully of all, the GC must be candid—willing to tell the chief executive and the board members what they need to hear, even if it is not what they want to hear or believe.
General counsel are spending vastly larger amounts of time and money on chieving not only the substance of good governance but also the appearance of it. Increasingly, the question “Is it legal?” has morphed into “Is it legal, and how will it look to someone who thinks all corporations are corrupt?” The general counsel who understands the courtroom or the deal table, but not the media or the legislative hearing room, is headed for trouble—and so is the company he works for.
Medco Health Solutions is a benefits-management company in Franklyn Lakes, New Jersey, with 2006 revenues of $42 billion.
