“I'd like to ask, what does our general counsel think?”
That question, posed in the midst of a board meeting, presents both opportunities and challenges for the company's general counsel. Board interactions with the general counsel add great perspective and vibrancy to the board's discussion. On the other hand, if the GC is unprepared or has not vetted issues appropriately with members of management, staff or outside counsel, the situation may become tricky.
In today's corporate governance environment, these questions often come in the context of executive sessions of committee or meetings where the board, absent of other members of the management team, want to find out what its lawyer's opinion is on key existing or emerging topics. So it is important to plan for executive sessions, to discuss issues in advance with management when needed and to expect the unexpected.
Relationships between the general counsel and the board of directors are complex, but in my experience, a majority of unexpected questions involve three areas of inquiry: ballparks, benchmarking, and the “No bull—what would you do in our position?” question.
The unknown generally motivates such ballpark questions posed by directors. Even though directors carefully review board materials, they may have questions about the financial impact of launching a major compliance initiative, acknowledging a newly filed case against the company, or experiencing an information breach.
All are serious issues where substantive reporting may not necessarily reveal potential financial implications. My favorite question from a director came in the middle of a presentation about a new compliance initiative. The question was not how much the program was going to cost but rather how much money the program would save the company. In areas of litigation, my other perennial favorite comment is, “Give me your ballpark estimate on what our chances of winning are.”
Even though there may be scores of issues yet to be considered in the litigation, be prepared to discuss your thoughts to demonstrate to the board that you are personally invested in the outcome.
Directors also like to ask GCs about benchmarks. They want to know how competitor practices, expenditures or responses to a situation compare with what their company is doing. Benchmarking against competitors is generally a key focus of business people, and so it's not surprising that they are more comfortable thinking about legal issues when they have a sense of where the company stands vis-à-vis competitors. Many times that information is not available to the GC or the legal staff. Trade associations, bar associations, GC working groups or outside counsel are good sources of information and, while names of competitors may need to be protected, these sources will provide much of what directors are looking for in a response.
Finally, in some instances, the question posed by directors is simply, “What would you do in our position?” In these cases the GC's measured, experienced insight and opinion is sought—with no “bull” mixed in.
Directors who ask this question will be listening carefully not only to what you say but how and why you say it. Take care to summarize your conclusion first and then, if necessary and if there is time, give a fuller answer. Too often, lawyers want to provide chapter and verse before giving their opinion. Unfortunately, directors in that situation may not understand what they are hearing or even what they should be listening for. If they sense that the GC is obfuscating—even when that isn't the case—they may lose confidence.
A simple approach to provide an opinion is to say, “There are many ways this issue may resolve itself, and we don't even know all of them at this point. But my opinion is the following…” In brief, the GC is well served to carefully plan for executive sessions and interactions with the board with lots of assistance.