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Volume 15, No. 7 © 2007 The Metropolitan Corporate Counsel, Inc. July 2007

General Counsel As Persuasive Counselors Tom Gottschalk: What Makes A Counselor Persuasive

The Editor interviews Thomas A. The learning experiences lawyers go tions when called upon for advice and to be Gottschalk, Of Counsel, Kirkland & Ellis through with their clients over their careers respectful that their role is only that of LLP and former Executive Vice President often make them very attuned to these advisor, and not decision maker. What and General Counsel, General Motors types of issues, because such sensitivities makes them persuasive is the thoughtful- Corporation. affect how courts react to their cases, how ness of the views they express; what makes the media will report on them, and how them effective is the respect with which the Editor: Norm Veasey talks about the ultimately the clients will view the client, represented by the CEO or Board, role of a general counsel as a “persua- lawyer’s effectiveness. You can win a legal accords their views. sive counselor.” How important is that battle, but still lose a public relations war. To be effective with the Board, general role, and what should the general coun- Whether something is technically doable counsel must candidly, succinctly and sel bring to the table to fulfill it? or not is only the starting line in consider- helpfully raise and discuss sensitive and ing whether something should be done or important issues with directors which help Gottschalk: Norm describes a role that is how to do it. them fulfill their roles in the corporation. critical both to ensuring timely compliance There has to be thoughtful considera- While this can create tension between the with legal and ethical standards, but also tion of the consequences of proposed CEO and general counsel, I had a support- important to good corporate governance actions. An executive may be legally enti- ive CEO at GM who encouraged me to and good business management. Many tled to huge compensation, or it may be build good rapport with directors. A gen- general counsel come to be regarded as permissible to hold an annual meeting in a eral counsel who has the Board’s confi- valued counselors by their CEOs often small conference room with only the sec- dence can be very helpful to the CEO. I with respect to business strategies as much retary present, but in today’s times those became a reliable, objective source of as legal or ethical questions. Lawyers are may not be smart actions to take. Lawyers information about some Board attitudes usually seasoned counselors by the time are not the only counselors CEOs should and concerns, and provided another per- they get to be general counsel. Their expe- draw upon, but because of their training spective about them and how to deal with rience and expertise make their judgment and background, seasoned lawyers are fre- them. and perspective particularly valuable so it quently able to bring that perspective into is not unusual for them to be invited into their everyday advice more so than many Editor: Should the Board be involved in the CEO’s inner circle of advisors. others. hiring, firing, and compensating the Another factor in this is that the role of As a result, CEOs and Boards are general counsel? the CEO itself has changed. Today, more increasingly looking for people with than before, the CEO is more of a political innate, or well developed, and broad- Gottschalk: No question, yes. As a senior figure than an authoritarian. CEOs have to gauged counseling ability to serve as gen- officer of the corporation whose client is be consensus builders and learn the art of eral counsel. It is one reason they look to the corporation and whose ultimate author- compromise to some extent. They lead by people with wide ranging backgrounds ity is the Board, the directors should be sat- listening, assimilating, and figuring out including public service or as leaders in isfied with the CEO’s choice for general how to move groups Ð externally, as well prominent law firms. counsel. At GM and I think most publicly as internally. They actively seek input from held corporations, the Board actually elects advisors with varying backgrounds to Editor: How can general counsel be the general counsel on recommendation of inform their judgment and their tactics. In effective as persuasive counselors for the CEO and the general counsel’s com- publicly held companies, CEOs live in an the Board? pensation is usually reviewed and environment where they not only need to approved by the Board or a Board commit- focus on the bottom line, they have to be Gottschalk: General counsel cannot be tee along with those of other senior offi- very alert and sensitive to how the media shy about voicing their opinions, but they cers. A prudent CEO will always consult perceives them, politicians regard them, need also to recognize that they do not with the Board as to the reasons for termi- and the public reacts to them. always have all the facts and considera- nating a general counsel, or otherwise risk Volume 15, No. 7 © 2007 The Metropolitan Corporate Counsel, Inc. July 2007

creating issues and a possible loss of con- Editor: Should general counsel attend Editor: Corporate social responsibility fidence by the Board in the CEO. meetings of the Board and its commit- is getting increased attention. What role tees? should general counsel play? Editor: How important is it that the gen- eral counsel meet in executive session Gottschalk: Certainly, they should attend Gottschalk: The best lawyers provide with the Audit Committee and interface Board meetings except for Executive Ses- advice rooted in the law, but beyond the directly with independent directors? sions which do not involve legal or fidu- law. They have a broader vision which ciary issues. To perform the role of comprehends how conduct will be per- Gottschalk: From an Audit Committee persuasive counselor, the general counsel ceived by others from an ethical and fair- perspective, it must be done. An Audit must be aware not only of what is being ness perspective. This perspective is very Committee which doesn’t do so ignores considered at the highest levels of the com- helpful to corporations which want to high- best practices under Sarbanes Oxley and pany, but what questions and concerns are light their contributions and responsibility passes up an opportunity to see compliance being raised. Such awareness is crucial to to society. Good corporate reputations and other issues from an important and the basic role of the general counsel which curry favor for your products and services. informed source Ð the general counsel. As is to assure that the company and espe- Bad ones cut the other way, and even neg- for independent directors, I think it is cially the Board are properly advised with atively influence judges, regulators, and healthy from everyone’s perspective for respect to the legal and fiduciary implica- legislators in matters affecting your com- independent directors to have direct con- tions of their actions. It is also essential to pany. General counsel can be supportive of tacts with the general counsel, and vice enable the lawyer to reflect on matters versa. Open exchanges of information and enlightened corporate policies and prac- coming to the Board and provide the tices, and can counsel against actions views should help build the Board’s confi- broader-gauged advice to management in dence in the general counsel and should which will be perceived as disrespectful of shaping its presentations and recommen- people or the environment. They can also help the general counsel advise both the dations and to the Board in acting on them. Board and the CEO more helpfully. The encourage their legal staffs and outside law To be effective, you have to know what firms to lead by example and contribute in CEO should normally be kept apprised of matters are coming to the Board in the substance of such contacts with inde- their own ways to community betterment, advance in order to assure that necessary for example, through pro bono activities, pendent directors. information is provided, to anticipate ques- and to professional goals, such as civility tions, and to be in a position to offer help- Editor: What effect do “up the ladder” and diversity. ful counsel during the Board’s reporting obligations have on the gen- deliberations. eral counsel’s ability to be an effective Editor: What roles do the in-house legal As to committees, there are some the counselor? staff and outside counsel play in helping general counsel or a designated lawyer the general counsel be a persuasive should attend, including audit, governance, Gottschalk: The concern is that the gen- counselor? and compensation. It is usually not feasible eral counselor will be viewed as a “snitch” for the Board and hence may be shut off for the general counsel to attend all com- mittees and it may be sufficient for the Gottschalk: It’s hard enough to be persua- from receiving candid information by oth- sive Ð you cannot be pervasive and counsel ers in the company. On the other hand, it general counsel to simply review materials going to certain committees in advance on everything. You need to draw upon the can be argued that it will cause others to expertise of your staff and occasionally “straighten up and fly right” in their busi- and to learn afterward what actions, if any, were taken. outside counsel to inform your own judg- ness dealings to avoid being called to the ment before providing advice to the corpo- Board’s attention. In actual practice, it ration. You also want these other lawyers depends more on how the general counsel Editor: What about senior management meetings? to develop their own skills as persuasive works the process, than on the structure of counselors so it is good to give them those the process. Without overplaying their opportunities directly, even with the Board. hand, general counsel can counsel the Gottschalk: There should be an under- Allowing the directors to hear directly business side to think in terms of possible standing between the CEO and general from a lawyer more expert than you in a Board reaction in deciding what course to counsel as to which management meetings take or recommend, by asking whether the the general counsel should attend. Major particular field respects the role the direc- company would be doing the “right thing,” strategic meetings, such as monthly execu- tors have and also builds their confidence and thinking through the potential down- tive committee meetings or strategic plan- in you that you will assure that they always sides even though the proposed action may ning meetings, should include the general have access to expert advice in matters be lawful. By helping management get the counsel so as to assure timely raising of where they should have it. Moreover, you Board comfortable with proposed actions, legal concerns, as well as to inform the as general counsel must assure that there is or with corrective measures once a prob- general counsel as to what are the business adequate legal coverage of the company’s lem has surfaced, as well as assuring that objectives and strategies and allow him or business activities. Once I heard a general the Board is adequately informed, the gen- her to provide perspective and advice. As a counsel say that in view of budget cut- eral counsel becomes a valuable and often persuasive counselor, the general counsel backs, they had to deny legal services to persuasive counselor. Counseling as to can help shape strategies to achieve those some business units. Today, a general possible required disclosures prior to business objectives most effectively. It is counsel should resign before tolerating a deciding on an action serves a similar pro- part of your job to be an active and helpful situation where managers run “blind” of phylactic role with management. member of management. the law.