The CCO as an Independent Voice: Another View
Donna Boehmes recent CorpCounsel.com article, Making the CCO an Independent Voice in the C-Suite, is a thoughtful and provocative read. But outside counsel may have a slightly different take on the independence concept, one that isnt quite as black and white. There is no question that the chief compliance officer position must be one with executive-level prominence and visibility. But the better question to ask may be about how CCOs and general counsel can collaborate and coordinate in support of the companys legal and compliance goals. The answer may be much more productive and relevant from the companys perspective.
But first, let us digress for a moment to the thorny but fundamental issue of separation of the CCO and GC roles. Granted, thats the preference of many federal law-enforcement agencies. And yes, if a company ends up in a settlement with the government, the terms will likely require separation of the two roles, with different individuals in each position. Thats pretty much a given. But theres no credible authority that mandates the separation of the two positions, under the leadership of different individuals, for every organization regardless of size, scope, and mission. We cant fairly presume that a company that maintains a consolidated CCO/GC position is any less capable of supporting an effective compliance program than a company that has separated the positions, surrounded by a moat.
It may not be best practice; it may not be what we would recommend; it may not be what the government would prefer. But that doesnt mean it cant work.
Boehmes article raises the valid question of the proper reporting relationship. She seems to favor the position advocated by the government, that the CCO should not under any circumstances report to the GC. Weve always interpreted the basic logic of the governments view to be that such a reporting relationship creates a potential for conflict of interest between the roles of the general counsel and the chief compliance officeras if the GC would somehow obstruct the CCO from advancing his or her views.
But there are a couple of fundamental problems with that logic. First, it is based on the inappropriate presumption that the general counsel will, when pressured, abandon his or her ethical obligations and act in a manner that is not in the companys best interestsas if state rules of professional responsibility on duty to client did not exist. It also ignores the fact that virtually every effective compliance plan has adopted the Federal Sentencing Guidelines recommendations on a direct reporting relationship between the CCO and the board of directors. That alone serves to effectively eliminate any risk of conflict with the GC.
Consider the views of one of the most respected governance commentators of the last 20 years. The former general counsel of General Electric Co., the estimable Ben Heineman Jr., has forcefully supported the concept of the CCO reporting to the GC. In recent contributions for the Harvard Law School Corporate Governance Forum, Heineman describes such a reporting relationship as supportive of the broader vision of a strong, broad-gauged GC. He argues that this avoids significant overlap of organizational responsibilities, because it concentrates the CCOs efforts on important process management, uniformity, and rigor throughout the company.
But lets not quibble further; lets look for some common ground. And we think it might be on the pressing need for clear, unmistakable guidelinesfrom the government, from professional associations, from any credible sourceon how the CCO and the GC can work effectively together instead of operating in independent silos.
What are we talking about? Lets start with creating a generally accepted (and ultimately industry-specific) set of guidelines on the respective scope of responsibilities of the CCO and GC. Put simply: This is your turf, this is mine, and heres where they overlap. Having such clear guidelines for any companys compliance function would certainly help.
But lets get even more practical. The companys compliance efforts only benefit from a cooperative and supportive GC/CCO relationship. We need to overcome the barriers that exist to the companys ability to effectively coordinate its legal and compliance functions. Lets not hide behind formal reporting relationships, and instead focus on the development of specific communication protocols that support board oversight of legal and compliance matters while respecting government concerns about transparency and conflict of interest. Lets help the board get a proper handle on this. Lets figure out how the GC and CCO can coordinate their efforts instead of constantly wondering if they need to hide their cards from each other.
Now, that would really be moving the [compliance] ball forward for the benefit of all concerned.
Michael W. Peregrine and Joshua Buchman are partners in the law firm McDermott Will & Emery. Mr. Peregrine advises corporations, officers and directors on issues related to corporate governance and fiduciary duties. Mr. Buchman focuses his practice on white-collar criminal defense and internal investigations.