When to Hire Outside Counsel - For Real

When to Hire Outside Counsel - For Real
By William Vogeler, Esq. on May 07, 2019 1:00 PM

In a series of blog posts, we've been talking about when to hire outside counsel. Join the club, you say, right?

General counsel talk about it all the time. When to do it, when not to do it; it's a regular dialogue. But since we're talking, let's get real. There is one time when in-house counsel must turn to outside counsel. Let's say it together: when there's a conflict.

When There's a Conflict

Conflicts can precipitate life-or-death consequences for companies. Remember what happened to Uber? Internal conflicts over sexual harassment and gender bias led to the ouster of the founder and perilous times for investors. The problems were an open secret, until a former Uber engineer dropped a bombshell about sexual harassment and discrimination at the company. Human resources, the story goes, handled it all wrong.

The corporate culture was toxic, and the fall-out spread to the highest levels. First a male board member resigned after blurting out a sexist remark about female member; then the founder resigned as chief executive officer a week later. Looking back at the mess, the company's best move was probably hiring outside counsel and following its recommendations.

It's hard to say how important that decision was, but the upcoming IPO will tell.

Handling the Conflict

Executives and general counsel have learned from past mistakes; that's what regulations will do. The Sarbanes-Oxley Act is an example of how that worked with corporate scandals before the Great Recession. In the absence of regulation, it takes a keen sense of right-and-wrong or at the very least, good- move-bad-move.

Renato Pontello, writing for Thomson Reuters Legal Executive Institute, says counsel should always analyze issues from the corporation's perspective. "In-house counsel should make it a habit to phrase advice in terms of the company's interests and, when necessary, politely remind senior executives they are not permitted under applicable ethics rules to give legal advice that might be construed as inconsistent with the company's interests," he wrote.

A written letter with disclosures to all board members can help. (Incidentally, since we're talking, FindLaw is owned by Thomson Reuters.) You might lose your job over it, but sometimes that's the price of ethics.

A good memo could also be a get-of-jail-free card, although technically that only works in Monopoly. We're talking about real life here.

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