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This Wisdom of the Crowd, compiled from questions and responses posted on the Compliance and Ethics Forum,* addresses the standard reporting structure for the General Counsel (GC) role within an organization.

 

(*Permission was received from ACC members quoted below prior to publishing their eGroup Comments in this Wisdom of the Crowd Resource.)

 

Question:

 

I am curious to whom in your company does the General Counsel (GC) report? Is it usual (or unusual) to have a GC report to the Chief Financial Officer (CFO) rather than the Chief Executive Officer (CEO)? Are there any issues to look out for in a situation where the GC reports to the CFO?

 

Wisdom of the Crowd:

 

A Word From Justin Connor, ACC Director of Chief Legal Officer (CLO) Services:

 

Corporate clients have opted for a variety of different reporting lines for the role of General Counsel (GC). According to a recent ACC Chief Legal Officer (CLO) Survey, with more than 1,300 chief legal officers participating globally, the majority (about 80%) state that their reporting line is directly to the CEO of the organization. Many General Counsel, particularly those of larger public companies, indicate that they are reluctant or unwilling to consider accepting a GC/CLO position with a reporting line other than to the CEO. This rationale is to ensure that the company views the role as a senior executive position with adequate resources, independence, and importance within the organization, and as a critical stakeholder in decision-making at the company. As a reference to this point, please consult the data on this at the ACC CLO Survey for 2014-2017.

 

Some CLOs have noted that there may be significant challenges and/or potential conflicts of interest in having the CLO report to the Chief Financial Officer (CFO) although some companies use this reporting structure. This type of reporting structure can raise concerns regarding the level of direct access of the CLO to the CEO, board, and/or even shareholders in the event of compliance or misconduct issues. This reporting structure could also lead to inadequate resourcing for the future, insufficient independence of the general counsel, and/or a culture within the organization where the legal department may be consulted last, not at all, or not considered as a key stakeholder in making the most important decisions within the organization.

 

Robin Myers (Director of Research, ACC) and Jinna Bulava (Associate General Counsel, ACC) recently wrote an article that highlights these reporting considerations in detail:

https://www.acc.com/vl/public/Article/loader.cfm?csModule=security/getfile&pageid=1396452&recorded=1

 
Response #1: I'm not titled GC, but as the sole counsel at my company. I report to the CEO. At one point about 7 years ago, the company reorganized, and I reported to the CFO for about 18 months (with a dotted-line to the CEO). It took some time, but I convinced the company to change the reporting structure back.1
 
Response #2: I report to the CFO and it works very well, although I have an open door to our CEO. In my opinion, the effectiveness of the reporting structure has a lot to do with the dynamics between senior leadership and their level of interest in legal issues. It was not my choice as to who I report to, but I agree that for our dynamic it helps me be most effective.2
 
Response #3: I am a CLO and I report directly to the CEO. Our office set up is such that my office is next to the CEO and CFO, so we consult with each other informally on a daily basis. I am also on the Senior Management Team. It may be the personality of my CEO, our corporate culture, or the fact that I also have an MBA with an affinity for strategic planning, but I have a great working relationship with the entire management team. I am included at the beginning of projects and consulted before a small issue becomes a large problem.3
 
Response #4: I report to the CFO, which is less common than reporting to the CEO. It is good to report to the CFO from the standpoint that there is a lot of overlap between finance and legal, and compliance is a primary objective of both departments in our company. However, because I report to the CFO and not the CEO, I am not considered part of the "Senior Leadership" team and left out of some meetings and discussions.

 

If you have a choice, I would rally to report to the CEO. I recall researching the issue when I tried to make a play to report to the CEO when a new CFO came into our company, and recall that the vast majority of companies have the GC reporting to the CEO.4
 
Response #5: I report to the CFO/COO. For a while it was good because our CEO was not focused and did not want to be focused on things that legal did, he never wanted to build a relationship with me. Now, two years later, he has decided that the company does not need in-house counsel and as a result, I am out the door. I was also left out of key meetings and held at arms length. So when I told him no, he did not respect my decision because the relationship was not there. Furthermore, he could easily dismiss me because I did not have all of the information.

 

So if you are going to report to someone within the organization other than the CEO, you need to make sure your CEO knows what you are working on and how you are contributing to the company. Build a relationship with him/her (if feasible) so that he/she will trust your advice.5
________________________
1Anonymous (February 24, 2017)
2Anonymous (February 26, 2017)
3Sherie Edwards, Vice President, Corporate and Legal, State Volunteer Mutual Insurance Company (February 27, 2017)
4Gerri Kornblut, General Counsel, Dwellworks, LLC (February 24, 2017)
5Anonymous (February 25, 2017)
Region: United States
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.
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