“IT IS the best of times for general counsels and it is the worst of times.” So paraphrases Ben Heineman, who has just given up the title of general counsel—though not necessarily the influence that came with it—at General Electric after nearly 17 years. He will remain at GE as “senior vice-president, law and public affairs”.
For the worst of times, look no further than the recent ethical crisis in corporate America. As Mr Heineman reminded the “in-house bar” at last week’s General Counsel Roundtable hosted by The Economist and Corporate Board Member, some general counsels have been indicted and others accused of heading departments where there is credible evidence of malpractice and breach of fiduciary duties.
Still others, he observed, are now “haunted by the question ‘where were they?’ as their enterprises literally collapsed in internal fraud and corruption”.
The best of times are not so obvious. Mr Heineman believes that the woes of corporate America have created an opportunity, and a pressing need, for general counsels to carry out the “rather grandiloquently named role of ‘lawyer-statesman’ or ‘statesman-adviser’.”
The ideal of the lawyer-statesman first emerged after the second world war, along with the big Mr Heineman cites Cyrus Vance, secretary of state under Jimmy Carter, and James Baker, who did the same job under the first President George Bush—as well as helping to install the second with his legal strategy in Florida. In private practice, both men advised many corporate chiefs.
Long before the Enron scandal, the decline of the lawyer-statesman was being regretted in books such as “The Lost Lawyer”, by Tony Kronman, a dean of Yale Law School, and “The Betrayed Profession”, by Sol Linowitz, a former general counsel (and chairman) of Xerox. Among the reasons suggested for the decline were the growing specialisation of law firms, reducing their ability to offer a broad view; a greater emphasis on profit by these firms; and the use of competitive bidding by companies buying legal services. “A senior partner is more likely to be bidding for work than whispering in the ear of the CEO,” says Mr Heineman. GE recently increased such pressure by making law firms compete for its legal business in online auctions.
Though, says Mr Heineman, a few lawyer-statesmen remain in private practice, in future they are more likely to thrive inside companies. This view is controversial. After all, the pressure to compromise bearing down on an in-house lawyer from his sole client, in practice the chief executive, may be even harder to resist than that facing a private law firm, which can at least compete for work from many clients. Crucially, says Mr Heineman, the chief executive must “want, really want, unvarnished views” and the general counsel must be strong enough to give them, and to resign if they are not accepted.