No matter what eventually happens, the controversy surrounding General Motors’ defective ignition switches and the company’s alleged failure to recall the product when needed will continue to resonate for in-house counsel in the decades-long struggle to define their dual public and client responsibilities.
As of this writing, the GM law department is being hurled into the vortex of accusation and investigation, especially when, on May 17, The New York Times ran the front-page story, “Inquiry by General Motors is Said to Focus on its Lawyers.”
The very existence of such prominent coverage underscores a few essential themes regarding the evolving profile of in-house counsel.
First, in-house counsel are no longer behind-the-scenes participants in events that affect the corporate brand. The GM story may not be the first instance in which GCs and their minions have faced significant exposure, but it’s a watershed moment nonetheless as we’re talking about the legal department of one of the world’s signature business entities.
GCs now find themselves sitting on boards and expanding their authority to strategic frontiers well beyond the narrow confines of traditional lawyering. That spells opportunity, but it also carries with it the same risk that all officers and directors undergo when companies allegedly violate the trust of their diverse stakeholders.
Second, nowhere are the burdens of accountability and transparency heavier than on the shoulders of in-house counsel. Here, too, is a salient opportunity for professional self-enhancement by in-house counsel: not just as consigliere, but to function as guarantors of the brand. “Of course, today’s in-house lawyer is much more involved in a company’s overall business strategy and day-to-day operations,” notes Amar Sarwal, vice president and chief legal strategist for the Association of Corporate Counsel. “Part of this role encompasses conducting effective internal investigations to uncover whether misconduct has occurred and to advise the company as to its legal and ethical obligations.”
In assuming such responsibility, Caesar’s wife must be beyond proverbial reproach. The lawyers cannot wait until the eleventh hour to take action, as has been alleged in the GM case. Nor can they keep victims and their families in the dark, as has also been alleged, and certainly not when the Secretary of Transportation has taken pains to remind us that doing so costs people their lives. If it was ever permissible, it certainly no longer is in the “Age of Transparency” when those outside the company will eventually find out. The time to do the right thing is always now.
Third, a seemingly shrewd legal strategy can directly disserve an entity’s long-term business interests. It is appropriate risk management to settle cases when long-term outcomes are uncertain or where publicity of any sort is potentially damaging regardless of who’s right and who’s wrong.
By contrast, settlements settle nothing when, as alleged in the GM case, the prime motive is to preclude damaging testimony, resulting in problems that continue festering and predictably resurface with exponentially increased organizational liability.
Here Sarwal offers an important caveat: “Whenever in-house counsel are placed in the crosshairs by regulators or others, it should be remembered that in-house lawyers represent the business, and that the business—not the lawyers—makes the strategic decisions, such as whether or not to settle.”
In any event, perhaps a truth of the GM situation, irrespective of how it resolves, is that GCs can’t have it both ways. If they want the newfound authority and enterprise-wide profile toward which their professional roles are trending, they must recognize that they cannot then recede into the shadows once—fairly or not—the glare of an unfriendly spotlight enfolds them.