A General Counsel (GC) is one of a small group of c-suite executives charged with leading a company. In serving the GC’s primary client, the corporation, the GC works closely with other c-suite executives, including the CEO. The CEO often has substantial say over the GC’s compensation and work. But what happens when the CEO seeks personal advice from the GC?
Kenton King of Skadden Arps, Scott Haber of Latham & Watkins, and Michael Ross, former general counsel of Safeway, spoke to the Berkeley Center for Law, Business and the Economy (“BCLBE”) community about conflicts that can occur when the company’s CEO personally solicits assistance from the GC. Often the prospect of personally advising a CEO creates a catch-22 situation. Though the GC needs to have a professional relationship with the CEO, providing advice may conflict with the GC’s loyalty to the corporation. This is especially true if the corporation and the CEO are on opposite sides of the bargaining table.
For example, imagine a situation where a CEO solicits advice from the GC on the CEO’s own compensation package. Later a dispute arises between the corporation and the CEO about that compensation package. The GC would likely have to recuse himself due to a conflict of interests. This could endanger the GC’s career and leave the corporation and Board of Directors without a trusted legal advisor.
Even providing the CEO advice on an unrelated matter could be dangerous: the GC would owe the CEO a duty of confidentiality and loyalty. If the CEO does anything in conflict with the corporation’s goals—such as spending significant working hours on private projects—the GC is duty bound not to share confidential information about the CEO. However, the GC would also face a conflicting duty to the corporation to share information affecting the company.
In most cases, it is appropriate for the CEO to secure his own outside counsel—though this can be an obstacle because of time and costs of attorneys. When CEOs are unwilling to secure their own counsel and GC’s feel pressure to provide legal assistance, the BCLBE panel suggested that GCs provide only general advice in order to protect their duty to the corporation.