Culture psychology the first two decades and beyond

A B RIEF H ISTORY OF THE C HANGING R OLE OF G ENERAL

COUNSEL IN THE UNITED STATES

The role of general counsel in large American corporations has significantly evolved since the late nineteenth century, experiencing fluctuations in power and prominence In contrast to the mid-twentieth century, today's general counsel holds a position of considerable prestige and influence within the corporate structure.

Period of Prestige: Post-Civil War through 1930s

Before the 1930s, general counsel held significant power and prestige within corporations, making legal positions highly sought after They played crucial roles in both legal and business matters, with their advice frequently sought by management This elevated status was reflected in their compensation, as general counsel earned approximately 65% of a CEO's salary and were often among the top three highest-paid executives in a company During this era, it was common for companies to prepare legal department members for CEO roles, with over 75% of corporate CEOs in America having a legal background, highlighting the value of legal education and its analytical skills in business.

76 See L AWRENCE M F RIEDMAN , A H ISTORY OF A MERICAN L AW 490 (3d ed 2005) (detailing the history of general counsels)

77 Carl D Liggio, Sr., A Look at the Role of Corporate Counsel: Back to the Future—

—Or Is It the Past?, 44 A RIZ L R EV 621, 621 (2002)

79 Edwin C Mruk, Address to the Association of the Bar of the City of New York

Committee on Corporate Law Departments (Nov 1977) offered to their business concerns 80

Period of Decline: 1940s through Mid-1960s

Since the 1940s, the influence of the general counsel role has diminished as corporations increasingly prioritize MBA graduates over legal professionals for senior management positions This shift reflects a broader trend in American businesses favoring business education, leading to a preference for MBA holders as the primary source for top leadership talent.

The decline of general counsel during this period was exacerbated by the rise of outside law firms catering to corporations' complex legal needs As MBAs gained prominence, corporate America’s respect for in-house counsel waned, leading to a reduced reliance on their expertise Consequently, by the mid-1970s, general counsel's income fell to about 30% of the CEO's salary, prompting top lawyers to shy away from corporate counsel roles This shift relegated general counsel to a relatively minor management position, often filled by a lawyer from the corporation's main outside law firm who had not achieved partner status, while in-house lawyers took on a more managerial role.

“corporate housekeeping” matters, and they acted as a liaison to, and not manager of, the outside legal firm 87

Period of Renaissance: Mid-1960s through 1980s

Beginning roughly in the mid-1960s and the early 1970s, a confluence of factors spawned the rise of general counsel in both power and

In the article "The Changing Role of Corporate Counsel," Carl D Liggio highlights the increasing significance of legal education for CEOs, emphasizing how it enhances their decision-making capabilities and overall effectiveness in corporate governance.

Marketers and financial experts emerged as the new "wunderkinds," significantly influencing corporate hiring trends and the selection of senior management.

83 Debora A DeMott, The Discrete Roles of General Counsel, 74 F ORDHAM L R EV

86 Abram Chayes & Antonia H Chayes, Corporate Counsel and the Elite Law Firm,

The unprecedented growth in federal business regulations has created complex legal compliance challenges for corporations, leading to a heightened reliance on external legal services Key regulations contributing to this trend include Title VII of the Civil Rights Act of 1964, the National Environmental Policy Act of 1969, the Occupational Safety and Health Act of 1970, the Fair Credit Reporting Act of 1970, the Employee Retirement Income Security Act of 1974, and the Foreign Corrupt Practices Act of 1977 Consequently, this increase in regulation has resulted in soaring legal fees for corporations, further exacerbated by a significant rise in business litigation during this period.

What ensued was a resurgence of inside counsel’s former power and prominence 98 As outside legal firms became more powerful, the high costs

89 Larry E Ribstein, Symposium: The Changing Role and Nature of In-House and General Counsel: Delawyering the Corporation, 2012 W IS L R EV 305, 308 (2012)

94 Pub L No 93-406, 88 Stat 829 (codified as amended in scattered sections of 5 U.S.C., 18 U.S.C., 26 U.S.C., 29 U.S.C., and 42 U.S.C.)

96 DeMott, supra note 83, at 960; Liggio, supra note 80, at 1204:

In 1963, Wall Street law firm starting salaries were just $7,200, significantly lower than the pay for experienced secretaries, with new attorney billing rates at only $17 per hour and partner rates at $45 In stark contrast, today's New York legal market sees starting salaries around $90,000, more than double that of a skilled secretary, while new associates average billing rates of $115 per hour and partners charge nearly $450 per hour.

By 2015, starting salaries for 85% of new associates at firms with more than 250 lawyers in New York City were $160,000; partner rates in New York City averaged $772 an hour in

2014 Press Release, Nat’l Ass’n for Law Placement, First-Year Associate Salaries at Large

Law firms are increasingly diverse, yet the benchmark compensation of $160,000 remains a defining figure at the upper echelon of the market This trend highlights the evolving landscape of legal practices while still recognizing established financial standards Notably, the 2014 Partner Compensation Survey by Major, Lindsey & Africa provides insights into these compensation trends within the legal sector.

97 See Liggio, supra note 80, at 1203 (noting that businesses “were now using the legal process as one more tool in the business planning process”)

Businesses that previously relied solely on outside legal counsel began to expand their in-house legal teams, driven by the desire for better quality and cost-effective legal services As elite law firms struggled to adapt their fee structures, companies sought more affordable alternatives, leading to a competitive environment among multiple outside firms This shift, often managed by general counsel, transformed outside counsel into a commodity and diminished the development of tailored, long-term relationships between law firms and corporate management Consequently, many companies transitioned from depending exclusively on outside counsel to establishing robust in-house legal departments staffed with skilled lawyers.

John Coffee highlighted that the role of general counsel evolved into that of a general manager of legal services, rather than merely a legal advisor to management Driven by self-interest, general counsel often resisted competition from outside counsel, aiming to be the primary source of legal guidance for management This led to efforts to discourage long-term relationships between senior management and external lawyers Additionally, in-house counsel strategically redistributed legal work to maintain their monopolistic status as the key provider of legal advice, thereby shifting the balance of power rather than the number of insider versus outside counsel.

Reflecting this shift, the American Corporate Counsel Association (“ACCA”) was established in 1980 105 “to create a new identity for the lawyers formerly known as ‘house counsel,’” 106 who, by the 1980s,

According to Ronald J Gilson in "The Devolution of the Legal Profession," if legal functions are carried out by external counsel, the market power shifts to them due to the switching costs involved.

100 Robert Eli Rosen, The Inside Counsel Movement, Professional Judgment and Organizational Representation, 64 I ND L.J 479, 505 (1989)

104 J OHN C C OFFEE J R , G ATEKEEPERS : T HE P ROFESSIONS AND C ORPORATE

105 Chayes & Chayes, supra note 86, at 277 n.1

David B Wilkinsal explores the global expansion of the in-house counsel movement and assesses the evolving roles of internal counsel in emerging economies He highlights the growing complexity and diversity of responsibilities that in-house legal professionals undertake Robert Rosen refers to this trend as the restoration of the power and prominence of general counsel, emphasizing its significance in today’s legal landscape.

Prestige at the Cost of Integrity?: 1980s to 2002

The rise of corporate counsel has sparked debate over a potential decline in their integrity, as highlighted by a 2000 study from Nelson and Nielsen This research found that modern general counsel in the U.S increasingly adopt an "entrepreneurial" approach, adapting their legal strategies to align with contemporary management priorities This entrepreneurial lawyer archetype evolves with business needs, viewing law as a tool for profit maximization within corporate strategy In contrast, the traditional "cop" role focuses more on compliance and risk management.

Policing the conduct of business clients involves interacting primarily through legal gatekeeping functions This includes tasks such as approving contracts, implementing compliance programs, and addressing legal inquiries These responsibilities highlight the critical role of legal professionals in ensuring that businesses adhere to regulatory standards and maintain ethical practices.

Counseling involves a comprehensive relationship with business stakeholders, enabling counsel to offer recommendations that consider business, ethical, and situational factors.

Unfortunately, as discussed in Part V, during this same period and

The Association of Corporate Counsel (ACC) evolved to reflect the global nature of legal practice by removing "American" from its name in 2003 This change signifies ACC's commitment to serving legal professionals across various sectors worldwide, emphasizing its role as the largest organization dedicated to the interests of attorneys in corporate legal departments.

The team effectively managed and evaluated legal services for corporate clients provided by external counsel, routinely offering standard legal support They also directly addressed complex transactions and litigation when necessary Additionally, they advised clients and their stakeholders on regulatory compliance and developed comprehensive compliance programs.

The Role of the General Counsel, 46 E MORY L.J 1057, 1061-62 (1997)

108 Rosen, supra note 100, at 488 (“No longer lacking resolution and courage, inside counsel exercise their own powers with advice from, but not at the direction of, outside counsel.”)

109 Robert Nelson & Laura Beth Nielsen, Cops, Counsel, and Entrepreneurs: Constructing the Role of Inside Counsel in Large Corporations, 34 L AW & S OC ’ Y R EV 457,

In response to the deregulation of various industries, many leading business schools have eliminated core business law courses from their MBA programs, leaving future business leaders unprepared to navigate the legal, ethical, and financial challenges they will face Furthermore, the prevalent doctrine of shareholder primacy, which emphasizes maximizing shareholder value, has been overstated in many curricula The legal framework surrounding the fiduciary duties of directors has evolved, indicating that, except in extraordinary circumstances, shareholder primacy is more of a managerial decision than a strict legal requirement.

The rise of entrepreneurialism among U.S general counsel in the 1990s is unsurprising, as this era was marked by the dot-com boom and active markets featuring mergers and acquisitions (M&As) and initial public offerings (IPOs).

Prototypical M&A lawyers from Wall Street or Silicon Valley often prioritize deal completion over legal compliance, drawing on their previous experience with investment bankers to navigate negotiations effectively.

In today's corporate landscape, general counsel have gained significant professional and social recognition, becoming trusted advisors to CEOs and senior management However, this close relationship has sparked concerns regarding the independence of general counsel and the potential for cooption, raising questions about whether personal interests and connections with senior management might compromise their ability to uphold fiduciary responsibilities.

113 See Nitin Nohria & Rakesh Khurana, Advancing Leadership Theory and Practice in

H ANDBOOK OF L EADERSHIP T HEORY AND P RACTICE 3 (Nitin Nohria & Rakesh Khurana eds.,

2010) (asking if educational institutions are to blame for poor leaders); see also Where Will They Lead? 2008: MBA Student Attitudes About Business and Society, T HE A SPEN I NSTITUTE

A study from 2008 revealed that a minority of M.B.A students felt that business schools adequately covered the ethical dimensions of effective leadership Additionally, the importance of legal training for business students is highlighted, emphasizing its role in developing responsible leaders in the business environment.

In situations where the breakup of a corporation or a change in control is unavoidable, the board's responsibility shifts from merely preserving the corporate entity to maximizing the company's value for the benefit of its stockholders, as established in the landmark case Revlon, Inc v MacAndrews & Forbes Holdings, Inc (1986).

116 June Eichbaum, Globalization and General Counsel, D IVERSITY & T HE B AR

Officers of a corporation have professional obligations not only to the corporation itself but also to the court Joseph Auerbach firmly stated that inside counsel cannot effectively fulfill dual roles, emphasizing the importance of maintaining clear boundaries in legal representation.

In 1993, Yale Law School Dean Anthony Kronman expressed concern that the American legal profession is at risk of losing its essence, advocating for the revival of the lawyer-statesman ideal He attributes the decline of this ideal to the rapid expansion of leading law firms, which has fostered a more commercial culture that marginalizes the role of the lawyer-statesman This issue is not new; as early as 1905, Supreme Court Justice Louis Brandeis cautioned that lawyers have largely become extensions of major corporations, neglecting their duty to protect the public.

The rising entrepreneurial mindset among general counsel, coupled with a lack of adequate legal and ethical training for future managers, has highlighted significant issues following major corporate scandals This trend has seen general counsel increasingly prioritize the demands of senior management, often at the expense of legal integrity.

The gatekeeping functions of management have been compromised by prioritizing business objectives over legal imperatives, as seen in the stock options backdating scandals at companies like Monster Worldwide, McAfee, and Brocade Communication Systems These scandals resulted in criminal convictions for key managers, highlighting the risks associated with deferring to management's judgments about legal risk.

SOX Enforcement Era: 2002 through 2008

The public outrage stemming from various scandals led to a significant shift in federal business regulations, highlighted by the enactment of the Sarbanes-Oxley Act (SOX) of 2002 This legislation aimed to ensure that lawyers prioritize the protection of public investors, transforming them from "entrepreneurs" to "gatekeepers" or "cops." As a result, Congress imposed rigorous scrutiny on the roles and responsibilities of inside counsel, effectively designating the Chief Legal Officer (CLO) of public corporations as a crucial gatekeeper in safeguarding investor interests.

125 Grant McCool, US Judge Sentences Ex-Monster Counsel to Probation, R EUTERS

Many companies engaged in accounting fraud by backdating employee stock options to earlier dates when market values were lower, allowing them to issue "in-the-money" options at a lower exercise price This practice triggered a charge against earnings, reflecting the difference between the fair market value on the grant date and the exercise price Consequently, firms that failed to report these compensation expenses misled stakeholders about their financial health.

126 Donald C Langevoort, Getting (Too) Comfortable: In-house Lawyers, Enterprise Risk, and the Financial Crisis, 2012 W IS L R EV 495, 496 (2012)

130 Pub L No 107-204, 15 U.S.C § 7201 et seq (2003) national securities markets.” 131 These external changes impelled internal ones

Section 307 of the Sarbanes-Oxley Act (SOX) mandates that in-house counsel must report significant legal violations to the chief legal counsel or CEO, and if there is no appropriate response, they are required to inform the audit committee The section also permits attorneys to disclose confidential information to the SEC under specific circumstances This legislative action followed criticism of Enron's legal advisors for failing to report accounting fraud In response, MassMutual Financial has implemented a policy requiring outside counsel to report any legal violations by the company’s employees or lawyers to the general counsel, CEO, and ultimately the board if necessary.

In response to stricter federal regulations, corporations began recruiting a new type of general counsel, leading to a significant transformation in the role's function This shift marked a move away from traditional backgrounds in Wall Street and Silicon Valley, favoring candidates with experience in Washington, D.C., and Capitol Hill Companies believed that appointing an ex-regulator or former federal prosecutor as their chief lawyer could help mitigate potential enforcement issues before they escalated into crises As a result, corporations increasingly sought general counsels with a regulatory background to navigate the evolving legal landscape.

132 17 C.F.R § 205.3(b); Ahmed & Farkas, supra note 46, at 866-67

133 17 C.F.R § 205.3(d)(2); Ahmed & Farkas, supra note 46, at 866-67

134 James L Sonne, Sarbanes-Oxley Section 307: A Progress Report on How Law

Firms and Corporate Legal Departments Are Implementing SEC Attorney Conduct Rules,

135 Ahmed & Farkas, supra note 46, at 863

Numerous former government officials have transitioned into high-ranking legal positions within major corporations, exemplifying the importance of regulatory knowledge in corporate governance Notable figures include Steve Cutler, Gary Lynch, and Dick Walker, who served as Directors of Enforcement at the SEC before becoming general counsel for JPMorgan Chase, Morgan Stanley, and Deutsche Bank, respectively Additionally, former Treasury Department general counsels David Aufhauser and Neal Wolin took on similar roles at Hartford Financial Services and UBS Other prominent examples include former Justice officials like Larry Thompson and Jim Comey, who became general counsels for companies such as PepsiCo and Lockheed Martin These leaders possess the ability to proactively identify and mitigate risks, ensuring compliance with evolving regulations and fostering ethical corporate behavior.

Recent evolutionary shifts have aimed to restore the original integrity and public good focus of inside counsel; however, they have not fully transformed the profession, as demonstrated by the subsequent subprime mortgage crisis and various scandals.

The Subprime Mortgage Crisis and Massive Product

L EGAL AND S TRATEGIC A STUTENESS

Legal astuteness is essential for non-lawyer managers to engage effectively with legal professionals on critical legal and ethical issues that impact business success Without this foundational legal literacy, communication between lawyers and non-lawyers often falls short, increasing the risk that legal counsel may lose their influential role within senior management to maintain the integrity of their position.

Legal astuteness is a crucial dynamic capability that can provide a sustained competitive advantage from a resource-based perspective It encompasses several key elements: a strong belief in the significance of law and ethical conduct for business success, a proactive stance towards regulation and risk management, the capacity for informed judgment in navigating legal and business issues, and a deep understanding of context-specific legal knowledge and the effective application of legal tools.

A top management team (TMT) relies on strategically astute lawyers to navigate legal complexities effectively Strategic astuteness encompasses a value-driven mindset, a proactive stance toward identifying business opportunities and threats, and a keen awareness of regulatory, legal, market, and competitive risks Additionally, it demands informed judgment to make sound decisions that enhance the organization's overall success.

(4) context-specific knowledge of management, business, the law, and the appropriate use of both managerial and legal tools 193

Accountability for Corporate Wrongdoing (Sept 9, 2015), http://www.justice.gov/dag/file/769036/download [perma.cc/2PK7-WEDH] (detailing the steps involved in investigating corporate misconduct)

The dynamic capabilities approach illustrates how certain firms achieve a competitive edge in an innovation-driven landscape characterized by competition based on price and performance, as well as the concept of 'creative destruction' of existing competencies This framework, articulated by Teece, Pisano, and Shuen, emphasizes the importance of adaptability and strategic management in navigating the complexities of modern markets, echoing Schumpeter's theories on economic development.

Legal astuteness is crucial for managers, as it enables them to effectively communicate with legal counsel and collaborate on solving complex issues, thereby leveraging the firm's resource advantages This integration of law and strategy is essential for successful business management.

192 See Bagley & Roellig, supra note 73, at 45-66

Value-Laden Attitudes

Legal and strategic acumen necessitate a strong commitment to the significance of law and ethical conduct for achieving economic success As Jim Metcalf, former President of USG Corporation, emphasized, “It’s important to remember who you are and where you’re from Then you fight like hell to be good stewards.” Leadership must create and uphold clear expectations for all employees, starting with senior executives, particularly regarding corporate values.

Effective management communication relies heavily on non-verbal cues and actions, often carrying more weight than verbal or written messages Corporations must not only articulate their corporate values but also ensure that their leaders embody these principles and hold others accountable for any discrepancies As highlighted by former General Electric General Counsel Benjamin Heineman, the integrity of corporate values is reinforced through consistent practice and accountability.

At a large company meeting, the emphasis on performance with integrity can be undermined by cynical remarks from executives during smaller gatherings, subtle gestures that condone unethical behavior, and personal actions such as dishonesty and lack of transparency that conflict with the company's core values.

"Creative compliance," as defined by Terrell, refers to the practice of adhering to the letter of the law while undermining its intended purpose, often exploiting unintended legal loopholes This approach conflicts with a culture that values legal integrity, as actions that are technically legal can still pave the way for future unlawful behavior.

These value-laden attitudes include an understanding of the intertwined nature of business and ethical interests; as already noted,

“business decisions consist of continuous, interrelated economic and moral

194 Constance E Bagley & Eliot Sherman, USG Corporation (C), Harvard Business

195 P HILIP T D ROTNING , Organizing the Company for Social Action, in T HE U NSTABLE

G ROUND : C ORPORATE S OCIAL P OLICY IN A D YNAMIC S OCIETY 260 (S Prakash Sethi ed.,

196 Benjamin Heineman, Jr., Avoiding Integrity Landmines, 85 H ARV B US R EV 100,

197 Timothy P Terrell, Professionalism on an International Scale: The Lex Mundi Project to Identify the Fundamental Shared Values of Law Practice, 23 E MORY L R EV 469,

In examining the ethical dimensions of corporate legal strategies, Daniel T Ostas highlights the significance of addressing legal loopholes and underenforced laws (2009) When conflicts arise between various interests, it is crucial for counsel and business leaders to continuously reframe issues and refine their tactics This approach ensures that they remain aligned with the firm’s legitimate business objectives while navigating complex legal landscapes.

In today's marketplace, success is defined by conducting business in an effective, legal, and ethical manner Managers must evaluate not only what their firm is capable of achieving but also what it ought to pursue This dual focus was aptly summarized by Ralph Larson, former CEO of Johnson & Johnson, who emphasized the importance of balancing shareholder value with corporate responsibility, stating, “Yes” to both Rejecting the notion of choosing one over the other, Larson highlighted a holistic approach to business ethics Warren Buffet of Berkshire Hathaway further underscored the significance of integrity in leadership, asserting that while intelligence and energy are vital, without integrity, they can lead to detrimental outcomes.

Victor Tettmar, managing partner of Bond Pearce, describes general counsel as the "guardian of moral capital." We contend that general counsel should serve as a key guardian while also empowering the top management team to share this vital responsibility By recognizing that "the moral aspects of choice" are essential to strategy, both counsel and managers can more effectively safeguard moral capital.

Proactive Approach

Taking a proactive approach to business and legal issues is essential for top management teams, as it reflects their legal acumen Rather than viewing challenges as legal problems, successful corporations recognize that they face business problems that may involve legal considerations.

199 Diane L Swanson, Addressing a Theoretical Problem in Reorienting the Corporate

Social Performance Model, 20 A CAD M GMT R EV 43, 51 (1995)

201 C R OLAND C HRISTENSEN ET AL , B USINESS P OLICY : T EXT AND C ASES 121 (6th ed.

202 Bagley & Page, supra note 69, at 913

204 See Ibolya Balog, Ethics on their Shoulders: Boards Bear the Burden, A CCT

Warren Buffett assumed leadership of Salomon Brothers on November 27, 2006, following a scandal involving the illegal manipulation of Treasury auctions that nearly led to the bank's collapse.

He gave employees his home phone number in Omaha, Nebraska, and asked them to call him directly if they observed any improper behavior); see also M ICHAEL L EWIS , L IAR ’ S

P OKER (1989) (telling the story of the author’s four years at a Wall Street investment firm)

205 Rebecca Lowe, Compliant Counsel, 8(2) I N -H OUSE P ERSPECTIVE 13, 14 (2012)

206 C HRISTENSEN ET AL , supra note 201, at 578

207 See generally Teece et al., supra note 189 (discussing how firms achieve and sustain competitive advantage) less important, depending on the specific circumstances.” 208

Business leaders who perceive the law merely as a constraint risk missing valuable opportunities to leverage the legal system for enhancing their firm's value By failing to engage legal counsel early in major transactions, they forfeit the strategic insights that skilled lawyers can offer It is crucial for business leaders to recognize the importance of involving in-house counsel from the outset, as late involvement often leads to negative outcomes and may result in skewed information being presented to lawyers in an attempt to secure approval.

Jonathan Anschell, CBS Television's General Counsel, highlighted the challenge of locating lawyers who approach new ventures with a positive mindset, rather than focusing solely on the risks involved.

Anschell emphasized the necessity of progress in ever-changing markets, stating, "We have no choice but to move forward." He highlighted that waiting for uncertainties to resolve is not an option, and instead, the focus should be on finding lawyers skilled in managing risk rather than avoiding it.

Exercise of Informed Judgment

Managing risk and being able to sense and seize opportunities require the exercise of informed judgment:

Law is inherently unpredictable, as legal rules are not applied in a rigid manner Even slight variations in facts can lead to significantly different legal results Frequently, there is a lack of clear precedent to follow, making it essential to navigate the uncertainties that come with legal decision-making effectively.

208 M ARSHALL B C LINARD & P ETER C Y EAGER , C ORPORATE C RIME 20 (1980)

211 Chayes & Chayes, supra note 86, at 281

212 Constance E Bagley & Mark Roellig, General Counsel: Strategic Partners or Hired Guns?, in E UROPEAN C OMPANY L AWYERS A SSOCIATION , C OMPANY L AWYERS :

I NDEPENDENT BY D ESIGN at 115 (Philippe Coen & Christophe Roquilly eds., 2014), http://www.ecla.org/files/files/Profession/document1.pdf [perma.cc/QBQ2-MAQ7]

213 Quoted in Gillian K Hadfield, Legal Infrastructure and the New Economy, 8 I/S J.

Effective decision-making necessitates informed judgment, particularly in legal matters Even managers with legal training recognize the value of consulting a qualified attorney who possesses both a deep understanding of the law and the wisdom to apply it judiciously As emphasized by Yale Law School Dean Anthony T Kronman, selecting a true legal counselor is crucial for navigating significant legal issues.

Wisdom transcends mere technical skill; it involves the ability to provide thoughtful advice This means not only offering the necessary tools to help clients reach their goals but also engaging in meaningful discussions about the validity and implications of those goals.

“Certain courses of action may be legal but not wise.” 216

Good judgment in the corporate environment is the ability to make effective decisions that align with business objectives It involves understanding the needs of all stakeholders and considering the implications of both action and inaction Decision-makers must gather relevant information to assess the situation and determine if external input is required, while also weighing the time and cost of obtaining additional data against its potential benefits Therefore, meetings should not be held merely for their own sake, but rather to facilitate informed decision-making.

Effective decision-making involves listening to, evaluating, and integrating diverse views from various stakeholders to identify trends, patterns, and opportunities Critical evaluation of goals, obstacles, and potential outcomes is crucial, considering the proportionality of risks, costs, and benefits This process requires weighing the importance of different possibilities and facts, while also considering what is ethically and societally acceptable, to make informed and responsible decisions.

Participants should refrain from impulsive actions and collaborate to ensure that proposed solutions are timely and effectively address the issue at hand, balancing uncertainty, risk, and opportunity It's crucial that the solutions implemented do not merely postpone the problem but genuinely resolve it Additionally, the proposed actions must be feasible, ensuring efficient implementation in a timely, cost-effective, and ethical manner.

215 Bagley, supra note 68, at 381 (citing K RONMAN , supra note 120, at 132-33)

To achieve long-term success, it is essential to prioritize collective benefits over personal interests and recognition Opting for a more challenging yet rewarding solution can lead to greater wins for both individuals and organizations, rather than settling for quick, short-term gains Additionally, understanding when and to whom to escalate decisions is crucial for effective decision-making.

While teaching good judgment may be challenging, practicing it is certainly achievable In the "Introduction to In-House Practice of Law" course at the University of Colorado Law School, co-author Roellig employs business-school-style case studies based on real-life scenarios to facilitate discussions The lead author has collaborated with in-house counsel from various companies, including MassMutual, Microsoft, CVS Health, and Prudential, to create tailored training programs that encourage participants to actively practice good judgment through customized case studies.

Context-Specific Knowledge of the Law and Business and

Legal astuteness is essential for non-lawyer managers to effectively engage with lawyers on legal matters impacting business goals This legal literacy encompasses context-specific knowledge of the law and the ability to apply legal tools appropriately Additionally, lawyers must possess business acumen, understanding fundamental concepts in accounting, corporate finance, negotiation, business planning, and competitive strategy.

Our legal team lacks a deep understanding of our business operations, highlighting a significant disconnect I seek lawyers who are willing to invest time in learning the intricacies of our work, identifying our needs and gaps Unfortunately, I often struggle to engage outside counsel to accept this opportunity.

The trust that managers and lawyers foster by regularly working together as a team is a firm-specific relationship 222 that “cannot be readily

217 See Course Descriptions, C OLORADO L AW , http://lawweb.colorado.edu/courses/courses.jsp?show=EK&sortBy=TITLE

[perma.cc/RXD5-5GGT] (last visited Jan 30, 2016) (Colorado Law offering “Introduction to In-House Practice of Law” to its students)

218 This course is discussed further in Part VI

In their 1994 article, Jay B Barney and Mark H Hansen discuss how trustworthiness serves as a crucial competitive advantage for firms They highlight that when a lawyer or manager transitions to another firm, the established teamwork can significantly improve the organization's capability to recognize the need for restructuring its asset framework This dynamic teamwork not only fosters internal cohesion but also facilitates essential transformations both internally and externally, ensuring the firm's adaptability in a competitive landscape.

USG Corporation, known for its Sheetrock® wall board, executed a successful bankruptcy strategy praised by Warren Buffett as “the most successful managerial performance in bankruptcy.” This involved filing for Chapter 11 to secure a channelling injunction, compelling asbestos claimants to seek compensation from a dedicated trust funded by USG The company also lobbied for federal legislation to establish a multi-firm fund for asbestos claims, litigated questionable claims, and implemented a human resource strategy that valued its workforce USG maintained transparency with investors and employees, upheld a reputation for reliability, and adapted its operations to distribute products from other firms After five years, USG emerged from bankruptcy with a reorganization plan approved by 98% of asbestos claimants, backed by Warren Buffett’s Berkshire Hathaway, and successfully paid off all debts while achieving over a 50% revenue increase CEO Bill Foote's legal expertise and lobbying efforts were crucial to this achievement.

GC [General Counsel] Stan Ferguson and other in-house lawyers along with the outside lawyers who helped litigate the asbestos claims and advised on the bankruptcy proceedings 225

224 Teece et al., supra note 189, at 520

225 B AGLEY , supra note 71 (citations omitted).

Partnership of Legally Astute Managers with Strategically

G ENERAL C OUNSEL AS S TRATEGIC P ARTNER N OT H IRED G UN

Entrepreneurial tendencies identified by Nelson and Nielsen played a significant role in the systemic corporate misconduct seen at Enron, WorldCom, and other previously successful companies, as well as in the major legal issues faced by Bank of America, Citicorp, General Motors, and Barclays.

226 Kim B Clark & Steven C Wheelwright, Organizing and Leading “Heavyweight” Development Teams, C AL M GMT R EV , Winter 1992, 9, 9

227 See generally, G RAHAM A LLISON & P HILIP Z ELIKOW , E SSENCE OF D ECISION : T HE

The Cuban Missile Crisis highlighted the strong correlation between the functional responsibilities of key decision-makers and their recommendations; for instance, the Secretary of Defense advocated for a military response, while the Secretary of State favored diplomatic negotiations.

Effective general counsel should not be viewed as purely entrepreneurial or solely as enforcers of rules; both extremes can be detrimental Successful counsel collaborate closely with business partners, recognizing that complete independence could render them irrelevant By exercising informed judgment, they contribute to driving business success while maintaining professional integrity and avoiding common pitfalls.

General counsel should actively participate in creating and capturing firm value while serving as a trusted advisor, embodying the role of a "strategic partner." This role differs significantly from that of the entrepreneurial lawyer, who often prioritizes the demands of top management In contrast, a strategically astute counsel engages in entrepreneurial activities without compromising their primary duty to uphold the law and ensure compliance with both its letter and spirit, thus balancing business interests with legal responsibilities.

General counsel should not completely avoid entrepreneurialism, as doing so can lead to an excessive focus on independence, similar to the overemphasis on independence concerns following corporate scandals This "fetishization" of independence overlooks the significant value that general counsel can provide by leveraging their connections within the corporation, which may outweigh potential conflicts of interest A strategic partner understands that business initiatives must align with the firm's financial, legal, and ethical responsibilities, consistently evaluating both the means and ends of business decisions This perspective reflects Dean Kronman's lawyer-statesman ideal, where true counselors engage in thoughtful deliberation with their clients about the appropriateness of their objectives.

230 Usha Rodrigues, The Fetishization of Independence, 33 J C ORP L 447, 447 (2008)

232 Omari Scott Simmons & James D Dinnage, Innkeepers: A Unifying Theory of the

The role of in-house counsel extends beyond merely providing legal means for clients to achieve their goals; it involves acting as a mediator between the client's desires and the broader social interest A lawyer who solely facilitates the objectives set by others risks becoming a mere servant, lacking the agency to influence outcomes In contrast, the lawyer-statesman embodies a dual representation, advocating for the client within the legal framework while simultaneously conveying the legal system's principles and constraints back to the client.

The ethical responsibilities of lawyer-statesmen in top management teams (TMT) can be challenging, as highlighted by IBM's general counsel, Robert Weber, who views this dual role as an untenable "millstone." However, we believe that general counsel can effectively serve as both senior executives and corporate conscience, provided they are not the sole guardians of ethics within the organization If they assume this sole responsibility, they may risk losing their position at the executive table, as other leaders may prioritize short-term profits over legal and ethical considerations, especially when executive compensation is linked to stock performance without regard for the ethical implications of profit generation.

Strategically savvy legal counsel collaborates with TMT members to foster a culture where all employees, particularly senior executives, understand the importance of adhering to legal and ethical standards for sustainable business success Consequently, the general counsel can maintain high ethical standards without the risk of losing their position among senior executives, as they are part of a collective effort.

In her 2014 article, Deborah Hussey Freeland highlights a concerning trend among lawyers, who are increasingly focused on becoming task-proficient rather than honing their intellectual and emotional deliberation skills This shift raises questions about the overall effectiveness and depth of legal practice, as it prioritizes efficiency over critical thinking and empathy.

235 Talcott Parsons, A Sociologist Looks at the Legal Profession, in E SSAYS IN

236 Robert Gordon, Corporate Law Practice as a Public Calling, 49 M D L R EV 255,

Robert Weber discusses the role of general counsel (GC) in his article, questioning whether GCs should be viewed as the conscience of their companies He argues that in-house lawyers are not, and should not be expected to be, the moral compass for their organizations This perspective highlights the complexities of the legal profession and the responsibilities of corporate legal advisors.

Company-Maybe-Not? [perma.cc/6D8M-UWLF]

238 Benjamin Heineman, Jr., General Counsel Are One Conscience of the Company; A

In response to IBM's Robert Weber, it is essential to recognize that general counsels serve as the moral compass within corporate leadership Their role is pivotal in ensuring that ethical considerations are at the forefront of business decisions, reflecting the collective conscience of the company in the C Suite.

To ensure outside counsel receives accurate and unbiased information on legal matters from business leaders or in-house lawyers, managers should be empowered to communicate directly with outside counsel, particularly when inquiries have been approved by in-house counsel The general counsel and the responsible manager must verify the independence of the outside firm to prevent conflicts of interest, similar to the situation with Enron and Vinson & Elkins MassMutual Financial exemplifies this practice by clearly communicating to its key outside counsel the expectation to directly address the CEO or board regarding any concerns about specific business or legal strategies during annual meetings.

Many firms adopt a reactive approach to legal issues, relying on outside counsel sporadically, while a proactive strategy involves ongoing communication with both in-house and external legal advisors The general counsel typically oversees legal expenditures and decides when to engage outside counsel, often serving as the primary liaison However, if in-house counsel is involved in a contested decision, it is crucial for responsible managers or board members to mitigate any potential conflicts of interest For instance, if the general counsel is implicated in the termination of an employee who later files a discrimination claim, independent counsel should evaluate the situation to ensure objectivity and transparency This approach safeguards the organization from risks associated with in-house lawyers concealing errors At MassMutual Financial, there have been instances where the general counsel has advised the CEO to consult outside counsel directly, without his involvement, to maintain impartiality in sensitive matters.

In the case of In re Enron Corp Sec Derivative & ERISA Litig., the court found significant allegations against Vinson & Elkins, Enron's outside general counsel It was claimed that the firm played a crucial role in structuring nearly all of Enron's off-balance sheet transactions and was responsible for preparing the related transaction documents This included providing legal opinions for deals that were allegedly designed to defraud investors and manipulate the securities markets.

FIGURE 1:REACTIVE APPROACH TO LEGAL ISSUES

FIGURE 2:LEGALLY ASTUTE APPROACH TO LAW AND MANAGEMENT

T HE V ALUE OF L EGAL A STUTENESS

Legal astuteness serves as a crucial dynamic capability that can provide a sustained competitive advantage in line with the resource-based view of the firm It embodies the entrepreneurial lawyer's strategic mindset, influenced by the legal and ethical principles of the lawyer-statesman ideal, thereby enhancing the value that legal counsel and the top management team contribute to the organization Legally astute management teams can effectively utilize formal contracts alongside relational governance to lower transaction costs and strengthen partnerships, safeguard and maximize the value of knowledge assets and other resources, leverage legal tools to create valuable options, implement strategic compliance management to ensure legal adherence while transforming regulatory challenges into opportunities, and actively influence the regulatory landscape.

Using Contracts to Strengthen Relationships

A notable study by Stewart Macaulay revealed that written contracts are frequently standardized and seldom referred to after being created by legal departments Instead of relying on the original contract to address disputes, parties often modify their obligations informally and resolve breaches without resorting to litigation When issues emerge, they tend to seek solutions as if the original contract never existed.

The dynamic capabilities approach illustrates how specific firms establish competitive advantages in a landscape characterized by innovation-driven competition, price and performance rivalry, and the creative destruction of established competencies.

243 O LIVER E W ILLIAMSON , M ARKETS AND H IERARCHIES : A NALYSIS AND A NTITRUST

245 Bagley, supra note 68; B AGLEY , supra note 71

246 Stewart Macaulay, Non-Contractual Relatives in Business: A Preliminary Study, 28

247 Iva Bozovic & Gillian K Hadfield, Scaffolding: Using Formal Contracts to Build Informal Relations to Support Innovation (Feb 25, 2015), http://works.bepress.com/cgi/viewcontent.cgi?article55&context=ghadfield

Kent Walker, General Counsel of Google, and others have “bemoaned the difficulty of reducing the reams of wasted paper and effort in managing the company’s contract relationships.” 248

In a decade of experience, Walker notes that disputes rarely hinge on the specific wording of non-disclosure agreements, yet significant time is still wasted on these issues He emphasizes the need for efficiency, often sending concise two-page documents, only to receive lengthy ten-page responses Walker questions how to motivate his legal teams to understand that excessive legal negotiations and risk aversion can result in missed opportunities or diminished deal value.

To effectively address Walker's challenge of incentivizing lawyers, it is essential to involve legally knowledgeable managers in the negotiation and drafting processes of contracts By combining comprehensive contracts with trust-building measures, the potential for disputes requiring court intervention is significantly diminished, even as these contracts operate within the framework of the law.

Insisting on formal contracts can be seen as a sign of distrust, potentially fostering opportunistic behavior; however, 251 North and Weingast argue that contracts actually complement reputation-building and punishment strategies The contracting process plays a crucial role in helping companies forge strong, valuable business relationships by enhancing social ties and clarifying expectations between the parties involved.

249 Id (quoting Kent Walker, the General Counsel at Google)

In their seminal work, Mnookin and Kornhauser (1979) highlight that individuals engage in negotiations influenced by legal frameworks across various contexts, not just family law They emphasize that the preferences of the parties involved, legal entitlements, transaction costs, risk attitudes, and strategic behaviors significantly shape the results of these negotiations.

251 Sumantra Ghoshal & Peter Moran, Bad Practice: A Critique of the Transaction Cost Theory, 21 A CAD M GMT R EV 13, 24-27 (1996); see also Macaulay, supra note 246, at

164 (discussing non-contractual relations and communication)

252 Douglass C North & Barry R Weingast, Constitutions and Commitment: The Evolution of Institutions Governing Public Choice of Seventeenth-Century England, 49 J.

In their analysis, Weingast and Marshall (1988) explore the industrial organization of Congress, highlighting that legislatures, unlike firms, do not operate as traditional markets They argue that non-market exchanges within legislative bodies can offer advantages over market-based transactions, suggesting a unique framework for understanding legislative efficiency and decision-making processes This perspective underscores the importance of examining the organizational structures of legislatures to fully grasp their functionality and impact on policy outcomes.

R Milgrom, Douglas C North & Barry R Weingast, The Role of Institutions in the Revival of Trade: The Law Merchant, Private Judges, and the Champagne Fairs, 2 E CON & P OL 1

A strong reputation is crucial in trade, as it establishes trust and reduces transaction costs Well-drafted formal contracts can enhance business relationships by minimizing ill-will and discouraging opportunistic behavior through the imposition of significant penalties for misconduct Conversely, if the interests of the parties involved are misaligned, poorly constructed contracts can lead to a loss of value.

A company's success relies on the ability of its lawyers to collaborate effectively with management, enhancing value through well-crafted contract language In-house counsel's understanding of the company's operations and business landscape is crucial for identifying potential risks and strategically addressing them to meet business goals This creativity involves anticipating exchange hazards, particularly related to specialized asset investments and performance metrics, and proactively defining remedies or processes for unforeseen outcomes While in-house counsel possess valuable insights, outside counsel bring specialized legal expertise and awareness of industry trends that can be beneficial Therefore, a strategic combination of in-house and outside counsel's knowledge maximizes organizational advantages.

A study by Bozovic and Hadfield revealed that both large and small companies that focus on innovation-oriented external relationships heavily rely on formal contracts to effectively plan and manage these partnerships For instance, a manager from an optics system firm highlighted this practice in their operations.

Engaging in business without a contract is not an option for me It's essential to have a clear agreement in place when investing time and resources, as it defines ownership and outlines responsibilities Understanding these terms is crucial for a successful partnership.

253 See, e.g., Apple Computer, Inc v Microsoft Corp., 717 F Supp 1428, 1430-32,

In a 1989 lawsuit filed by Apple against Microsoft, the court highlighted that if the parties intended to restrict Apple's license specifically to the Windows 1.0 interface, they would have clearly articulated that intention.

254 Laura Poppo & Todd Zenger, Do Formal Contracts and Relational Governance Function as Substitutes or Complements?, 23 S TRAT M GMT J 707, 707 (2002)

When dealing with innovative projects, it's crucial to establish clear agreements, especially when significant financial stakes are involved Unlike standard transactions governed by the Uniform Commercial Code (UCC), innovative endeavors often lack established precedents, necessitating tailored contracts For instance, one of our ideas has generated millions in royalties, underscoring the importance of documentation and the potential need for multiple amendments to the agreement to protect future rights effectively.

Bozovic and Hadfield discovered that managers of innovation-focused external relationships do not typically create formal contracts to ensure the advantages of credible contract enforcement Instead, similar to the respondents in Macaulay's study, they predominantly depend on relational mechanisms, such as termination and reputation, to foster compliance.

We agree with Bozovic and Hadfield’s assertion that:

Formal contracting involves utilizing official documents and the expertise of a formal contract institution to align expectations regarding breaches of ambiguous obligations This alignment facilitates the execution of strategies that promote compliance, even amidst significant uncertainty at the time of the agreement, ultimately maintaining the essence of a relational contract.

Enhancing, Leveraging, and Transforming the Value of

A company's inability to establish effective legal mechanisms for protecting and maximizing its assets can hinder its capacity to fully capitalize on their value, similar to the consequences of inadequate corporate governance To safeguard and enhance their intellectual capital, businesses can leverage various intellectual property (IP) rights, such as patents, copyrights, trademarks, and trade secrets These legal tools, including formulas, processes, and customer lists, provide a competitive edge by maintaining confidentiality and protecting valuable information.

Patents, copyrights, and trade secrets enable businesses to charge premium prices, collect royalties, minimize costs, and establish barriers to entry Additionally, trademarks play a crucial role in building and maintaining brand equity.

EMC Corporation boldly chose to acquire VMware, a leader in x86 software virtualization technology, despite VMware facing a patent infringement lawsuit with Microsoft, unlike many competitors who hesitated due to litigation risks.

262 Constance E Bagley & Reed Martin, Warner Bros and BitTorrent, Harv Bus Sch Case No 807-012 (2006)

267 Bagley et al., EMC Corp.: Proposed Acquisition of VMware, Harv Bus Sch Case

EMC’s CEO Joe Tucci and General Counsel Paul Dacier successfully persuaded the board of directors that the advantages of acquiring VMware outweighed the associated risks Their decision was influenced by EMC’s ability to leverage its patents, its expertise in patent litigation, and its strategy to mitigate enterprise risk through a reverse triangular merger, ensuring VMware operated as a separate subsidiary Additionally, EMC maintained a complex relationship with Microsoft, which was both a competitor and a partner Approximately one year post-acquisition, Microsoft CEO Steve Ballmer suggested that both companies drop their legal claims, highlighting the notion that "friends do not sue friends." The acquisition of VMware, initially purchased for around $635 million in 2004, saw its market capitalization soar to over $43 billion by August 15, 2014 Following an IPO in 2007, EMC retained an 80 percent stake in VMware, valued at approximately $34 billion, representing nearly 57% of EMC’s total market capitalization of $60 billion Had EMC not evolved from a commodity hardware manufacturer to a data solutions provider, it likely would not have achieved its current earnings multiple of about twenty-four times.

Intellectual property (IP) rights alone are seldom enough to ensure a lasting competitive edge As Margaret Peteraf pointed out, if an innovation merely combines existing technologies in a clever way, even extensive patent protection will not deter competitors Therefore, companies must focus on developing unique value propositions beyond just IP rights.

The continuous innovation in the market is driven by consumer demand for more affordable or unique products, as well as the ability to anticipate needs that customers are unaware of until they are presented with them, a skill exemplified by Apple co-founder Steve Jobs.

Second, a firm should never use its resources to protect or establish its

IP rights at the expense of innovation itself:

Polaroid successfully won its lawsuit against Kodak for patent infringement related to instant film and cameras, but this legal battle may have distracted both companies from recognizing the emerging threats and opportunities presented by digital photography Similarly, Apple's prolonged litigation against Microsoft and Hewlett-Packard for copyright infringement raises questions about whether such distractions hindered Apple's ability to innovate and adapt in a rapidly changing tech landscape.

268 Bagley, supra note 73, at 31-32 (citations omitted)

269 Margaret A Peteraf, The Cornerstones of Competitive Advantage: A Resource- Based View, 4 S TRAT M GMT J 179, 187 (1993)

270 Bagley, supra note 73, at 35 improve the Macintosh computer[?] 271

Polaroid's experience highlights that winning a legal battle against a major competitor can be a hollow success if it diverts a company's focus from reallocating resources to adapt to evolving market demands.

Managers and their legal teams should be cautious about excessively safeguarding a firm's intellectual property rights, especially when the business strategy permits some level of unauthorized copying by users For instance, when drafting terms of use for CBS Television content online, it may seem logical to create terms that strictly enforce CBS's ownership However, CBS's Executive Vice President and General Counsel, Jonathan Anschell, advocates for a more flexible approach that balances ownership with user engagement.

In the realm of new media, it's crucial to have lawyers who recognize that overly restrictive measures can hinder the creation of valuable user-generated content However, many legal professionals tend to propose terms that favor users at the expense of content providers, creating a challenging imbalance What we truly need is a middle ground that balances the interests of both parties, yet finding legal experts who can navigate this nuanced landscape remains a significant challenge.

In today's digital age, lawyers must grasp not only the intricacies of the law but also the impact of technological innovations on traditional business models As information becomes increasingly digitized, we witness disruptions in how services and products are delivered, potentially leading to the demonetization of certain offerings Embracing a strategy that prioritizes widespread access to products and services, even at no cost, can often provide greater value to both companies and society than the instinct to restrict access and protect proprietary interests.

Creating Options

Legally astute managers recognize the inherent value of options and will work with strategically astute lawyers to use the law to create them 277

An option is the right, but not the obligation, to defer a decision until a

276 Id (quoting CBS’s General Counsel Anschell, explaining that locking it down is not always the best decision)

Real options theory highlights the value of postponing decisions amid uncertainty, allowing for strategic flexibility This approach encompasses various options, such as the ability to purchase real estate or stocks, terminate joint ventures, enforce vesting on founder shares, and secure co-investment rights in future venture capital rounds.

Strategic Compliance Management

Recent corporate scandals highlight that inadequate legal compliance can lead to significant financial repercussions for companies, including substantial criminal and civil penalties These penalties often represent just a fraction of the total losses incurred, as legal fees frequently surpass the imposed fines Fraud can cost businesses between one and six percent of their annual revenues, making the prevention of fraud a crucial factor for gaining competitive advantage and enhancing financial performance in today's market Conversely, illegal activities can result in a company's downfall, as demonstrated by the cases of Drexel Burnham Lambert and SAC Capital Advisors, which faced severe consequences due to insider trading by their executives.

Creating a law-abiding culture that does not diminish managers’ competitive drive is difficult but certainly not impossible Legally astute

279 Bruce Kogut & Nalin Kulatilaka, Capabilities as Real Options, 12 O RG S CI 744-

280 C ONSTANCE E B AGLEY & C RAIG E D AUCHY , T HE E NTREPRENEUR ’ S G UIDE TO

282 See supra text accompanying notes 3-40 (discussing the penalties for corporate malfeasance)

283 See, e.g., Brinded, supra notes 6 & 14 (demonstrating the extremely large penalties and legal costs that companies are often forced to pay)

284 Karen Schnatterly, Increasing Firm Value Through Detection and Prevention of White-Collar Crime, 24 S TRAT M GMT J 587, 587 (2003)

286 See, e.g., S TEWART , supra note 44 (describing Drexel Burnham Lambert’s collapse after unethical and illegal activities eventually led to bankruptcy)

287 Peter Lattman & Ben Protess, $1.2 Billion Fine for Hedge Fund SAC Capital in

Cohen was allowed to transfer his personal and family assets to Point72 Asset Management, the successor firm; however, Point72 is prohibited from managing external funds, leading to the liquidation of SAC Capital.

TMTs practice “strategic compliance management.” 288 There are ten steps:

1 Start with ethics and start at the top

2 Help shape the rules of the game

3 Look for opportunities to convert constraints into opportunities

4 Understand duties and anticipate risks

5 Benchmark both accidents and violations and near-misses

6 Avoid conflicts of interest and fully disclose

7 Implement appropriate controls and processes

9 Educate all employees and distribute written policies

10 Be prepared to deal with compliance failures 289

The implementation of these ten steps is highly context-specific, requiring each firm to customize its controls, policies, processes, and practices based on its unique noncompliance risks Given that compliance is not a universal solution, merely copying best practices may not yield effective results Nevertheless, independent directors must consistently communicate to the general counsel, CEO, and senior management their expectation for regular updates regarding any actual or potential material legal violations, breaches of fiduciary duty, and other significant legal issues.

Whistleblowers serve as vital early warning signals for potential disasters, yet they frequently face neglect and isolation It is essential for managers to implement protective measures to shield whistleblowers from retaliation, ensuring their voices are heard and valued.

289 See id at 47-50 (setting forth a nine-step program)

The article emphasizes the importance of establishing a compliance platform for effective management, highlighting that this capability is inherently path-dependent and cannot be easily acquired or traded as a resource.

291 Teece et al., supra note 189, at 517

William W Horton discusses the complexities faced by in-house healthcare counsel in managing professional responsibilities while serving multiple stakeholders His analysis, published in the Journal of Health & Life Sciences Law, highlights the ethical challenges and the need for clear guidelines to navigate these responsibilities effectively Additionally, the American Bar Association's Task Force on Corporate Responsibility emphasizes the importance of corporate ethics in legal practice, reinforcing the significance of accountability in the healthcare sector.

145, 161 (2003) (suggesting that directors work actively with general counsel on “oversight responsibilities” and “legal compliance matters”)

In "Managers and the Legal Environment: Strategies for the 21st Century," Constance E Bagley highlights the crucial role of managers in identifying potential risks within an organization She compares their perceptive abilities to canaries used in mines, noting that managers often detect dangers that may not yet be visible to top management This insight underscores the importance of effective communication and risk management strategies in navigating the complexities of today's business environment.

In the article "Bureaucrats with Conscience" by Joel Chineson, a whistleblower highlights the personal toll of exposing violations at a nuclear power plant, stating, “Be prepared for old friends to suddenly become distant Be prepared to change your type of job and lifestyle Be prepared to wait years for blind justice to prevail.” This underscores the significant sacrifices faced by those who stand up against wrongdoing in high-stakes environments.

Spector, Takata U.S Employees Saw Problems in Air-Bag Tests, W ALL S T J (Nov 24,

At MassMutual Financial, the compliance organization emphasizes the importance of ethical behavior by encouraging employees to report any unethical issues or violations of regulations They utilize various communication methods, including policies, posters, emails, and blogs, to ensure that employees recognize their obligation to speak up Additionally, employees are supported not only by their superiors but also by their coworkers, fostering a culture of moral and psychological support in the workplace.

When employees are held accountable for traditional corporate tasks that directly impact their success or failure, while also being expected to pursue social objectives that are not measured, the outcome is predictable Even the most dedicated employees will prioritize tasks that influence their career advancement, leading to a lack of focus on social initiatives.

As Judge Doumar commented after a jury found Kidde liable for misappropriating trade secrets belonging to X-It, a start-up that had developed an innovative fire escape ladder:

The case exemplifies the darker side of corporate governance in the late 20th century, where the pursuit of profit often led to reckless decision-making and prioritized short-term gains over long-term sustainability This environment created undue pressure on corporate officers, compelling them to adopt aggressive strategies that ultimately undermined the true value of the assets they managed As a result, these officers often found themselves at odds with the very businesses they were supposed to be enhancing, ultimately contributing to their downfall.

Strategic compliance management is essential for legally astute TMTs, as it aims to enhance firm value rather than merely avoiding legal pitfalls This approach transcends basic legal compliance, offering a competitive edge by exceeding regulatory requirements For instance, companies that proactively address issues, such as those related to food safety or product recalls, can strengthen their market position and build consumer trust.

[perma.cc/9AAQ-293J] (“For a decade, Takata Corp employees in the U.S raised concerns internally about misleading testing reports on air bags that later became prone to explosions.”)

The Department of Veterans Affairs has been accused of silencing and punishing whistleblowers In a notable incident, a food services manager at the Philadelphia facility faced retaliation after he reported unsafe sanitation practices His supervisors attempted to terminate his employment over a trivial matter involving four outdated sandwiches worth approximately $5, and he was subsequently reassigned to clean a morgue.

Blew the Whistle on the VA – and Then Was Almost Sacked for Eating Stale Sandwiches

In a compelling article from the Washington Post, the story of a whistleblower at the VA highlights the challenges faced when exposing misconduct, as he was nearly fired for a seemingly trivial issue—eating stale sandwiches This incident underscores the difficulties whistleblowers encounter, often facing retaliation despite their efforts to bring attention to serious problems within the organization The article sheds light on the broader implications of protecting those who take a stand against wrongdoing in government institutions.

298 X-It Products, L.L.C v Walter Kidde Portable Equipment, Inc., 227 F Supp 2d

The Food and Drug Administration (FDA) was contemplating a mandate for companies to disclose the levels of hydrogenated oils (trans fats) in their products In response, PepsiCo's Frito Lay division eliminated hydrogenated oils from its snacks and secured FDA approval to prominently label its products as containing zero trans fats Meanwhile, MassMutual Financial leveraged information from publicly available Death Master Files to both cease annuity payments and disburse life insurance benefits, despite the requirement for beneficiaries to provide proof of death prior to payment.

Shaping the Regulatory Environment

T RAINING THE N EXT G ENERATION OF L EGALLY A STUTE

MANAGERS AND STRATEGICALLY ASTUTE LAWYERS

As the Academy of Legal Studies in Business (“ALSB”) has stated:

Law and ethical behavior are essential pillars of a civilized society, influencing the global business landscape Legal studies play a crucial role in business education, guiding responsible decision-making and managerial conduct The seminal report by Robert Aaron Gordon and James Edwin Howell emphasizes the importance of integrating legal and ethical principles in higher education.

In 1959, nearly all leading business schools mandated a course in business law, but by 2008, only four of the top twenty graduate schools, including Carnegie Mellon, Michigan, Wharton, and Yale, maintained this requirement A 2015 review of MBA curricula from these top institutions revealed no core courses specifically focused on business law or the legal environment However, Stanford, Harvard, and NYU's Stern School included courses that addressed legal issues within their broader curriculum The Wharton School continues to offer a course titled "Legal Studies and Business."

Off-Label Promotions and the Commercial Speech Doctrine, 23 C ORNELL J.L & P UB P OL ’ Y

337 (2013) (analyzing the judicial and regulatory effects on the commercial speech doctrine)

336 Academy of Legal Studies in Business, ALSB Strategic Plan: Core Values (May 22,

2012), http://alsb.mobi/infobox/strategic-plan [perma.cc/54PG-6UEY]

337 R OBERT A ARON G ORDON & J AMES E DWIN H OWELL , H IGHER E DUCATION FOR

339 Constance E Bagley et al., Deep Links: Does Knowledge of the Law Change Managers’ Perceptions of the Role of Law and Ethics in Business?, 47 H OUS L R EV 259,

340 Best Business Schools Ranked in 2015, U.S N EWS & W ORLD R EPORT , http://grad- schools.usnews.rankingsandreviews.com/best-graduate-schools/top-business-schools/mba- rankings?intc208 [perma.cc/3B4Q-2VQP] (last visited Dec 29, 2015)

341 Stanford University requires “Strategy Beyond Markets,” which examines the

“legal, political, and social environments of business” in the decision-making arena

The Stanford Graduate School of Business offers a personalized curriculum that emphasizes tailored educational experiences Harvard University includes a vital course on "Leadership and Corporate Accountability," focusing on the legal, ethical, and economic responsibilities of corporate leaders, which is essential for understanding the required curriculum in business education.

H ARVARD B USINESS S CHOOL , http://www.hbs.edu/mba/academic-

Ethics” as part of its MBA flexible core curriculum 342

The increased emphasis on quantitative research in the wake of

Higher Education for Business has often overlooked legal scholarship that doesn't fit within the confines of law and economics or regression analysis However, critical human factors such as judgment, ethics, and morality, which are frequently dismissed by academics due to their inability to be quantified, play a crucial role in distinguishing between sound and poor business decisions Notably, the Executive MBA program at NYU's Stern School of Business emphasizes "Professional Responsibility," highlighting the necessity of understanding the interconnectedness of markets, ethics, and law within a democratic, free market society.

342 Core Curriculum Structure, U NIVERSITY OF P ENNSYLVANIA W HARTON MBA, http://mba.wharton.upenn.edu/academics/curriculum/core/ (last visited Dec 29, 2015)

343 G ORDON & H OWELL , supra note 337, at 107

Business schools are currently facing a crisis of purpose, as highlighted by Watson and Seidel, who argue that these institutions have become more focused on theoretical frameworks rather than practical applications that address real business challenges The publication of "Higher Education for Business" has prompted academics to adopt a more scientific approach to business research, resulting in a significant shift in their objectives.

Id This prompted business schools to focus on “analysis over problem solving.” Id

Some scholars argue that business research is shaped more by practical application than by academic theory, suggesting that influential business books are primarily authored by practitioners rather than academics This perspective is supported by various studies, including those by Pfeffer and Fong, as well as Barley, Meyer, and Gash, highlighting the dynamic relationship between academic research and real-world business practices.

In 2014, Gianmarco Massameno explored the concept of "physic envy" that emerged among business school professors following reforms initiated by the Ford Foundation and the Carnegie Commission His analysis compares the experiences of practitioner academics and traditional academics at Harvard Business School, highlighting the impact of these reforms on institutional dynamics.

(2014) (unpublished master’s independent study, Harvard University) (on file with the third author) (study finding that at the Harvard Business School (“HBS”), on average,

Practitioner academics experience a statistically significant higher level of perceived respect from students, fellow practitioner academics, and MBA peers, but not from traditional academics, PhDs, or administrative staff Faculty feedback indicates that respect for practitioner academics varies based on Harvard Business School's perception of their roles, with some linking increased respect to higher research quality, a characteristic typically associated with traditional academics.

345 Warren G Bennis & James O’Toole, How Business Schools Lost Their Way, H ARV

Business schools have strayed from their core mission, as evidenced by surveys from the Aspen Institute revealing that MBA candidates often feel less confident in their ability to handle ethical dilemmas during their studies Jeffrey C Garten, the former Dean of the Yale School of Management, emphasized the importance of enhancing ethical education for future business leaders, stating that it should be a top priority for these institutions He advocated for all students to acquire a fundamental understanding of business law to better prepare them for ethical challenges in the workplace.

In 2012, the ALSB formed a presidential task force on the State of the Discipline, initially chaired by the lead author and later co-chaired by Lucien Dhooge from Georgia Tech's Scheller College of Business This task force collaborated with the drafters of the revised AACSB standards to address legal and regulatory matters effectively The updated AACSB International accreditation standards, adopted in April 2013 and revised as of January 31, 2015, mandate the inclusion of the economic, political, regulatory, legal, technological, and social contexts of organizations within a global society.

Despite the clear standards established, there are reports suggesting that some accreditation reviews conducted after the new guidelines were implemented may overlook the necessity of adequately addressing legal and regulatory issues The AACSB has recently reaccredited graduate business programs at various institutions, including the University of California, Los Angeles, and Quinnipiac University in Connecticut, despite the absence of a mandatory legal and regulatory curriculum in either program.

The discussion around the need to retrain business schools has gained traction, particularly in light of the significant presence of MBA graduates in the finance sector Prominent figures in finance, such as John Thain and Richard Fuld, exemplify the impact of business education on corporate leadership As top business schools consistently direct a substantial portion of their graduates into finance, the question arises whether the current educational focus adequately prepares students for the complexities of managing risk and problem-solving in a rapidly evolving business environment.

347 Jeffrey C Garten, B-Schools: Only a C+ in Ethics, B LOOMBERG B USINESSWEEK

Business schools play a crucial role in equipping students with the skills necessary to navigate complex ethical dilemmas, emphasizing the importance of applying nuanced value judgments in situations where right and wrong are not clearly defined.

349 Henry Lowenstein, Building the Manager’s Tool Box: Reflections of a Former Business Dean on the State of Law in the Business Curriculum, 30 J L EGAL S TUD E DUC

The 2013 ALSB-AACSB liaison team consisted of notable members, including Peter Shedd from the University of Georgia, who served as the liaison at the time, and Janine Hiller of Virginia Tech, who currently holds the position.

350 Correspondence with the lead author on file with the lead author

352 AACSB I NTERNATIONAL , E LIGIBILITY P ROCEDURES AND A CCREDITATION

The Standards for Business Accreditation emphasize the significance of a business law course within the legal environment The interrelation of leadership roles, such as a CEO serving on another firm's compensation committee, can compromise objectivity in accreditation reviews This dynamic raises concerns about the impartiality of individuals evaluating the importance of legal studies in business education.

G LOBALIZATION AND THE C HANGING R OLE OF G ENERAL

COUNSEL:NEW DATA,PREDICTIONS, AND PRESCRIPTIONS

This section briefly explores the current and anticipated effects of

The article explores the impact of globalization on in-house counsel and their corporate clients, focusing on the evolving role of general counsel in the United Kingdom and presenting new data regarding in-house counsel in Sweden It highlights the negative effects of malfeasance in international contexts while emphasizing the advantages that legal and strategic astuteness offer to legal practitioners, particularly chief legal officers and managers outside the United States.

Globalization unfolds in stages, typically progressing from country to country, with the United States at the forefront, followed by the U.K., Continental Europe, and emerging nations This phenomenon has driven legal professionals in Continental Europe and the BRIC countries—Brazil, Russia, India, and China—to adopt practices similar to those of the Anglo-American legal system.

392 J OSEPH S TIGLITZ , G LOBALIZATION AND ITS D ISCONTENTS 9 (2002) (defining

Globalization refers to the increasing interconnectedness of countries and peoples worldwide, driven by significant reductions in transportation and communication costs This phenomenon has facilitated the removal of artificial barriers, enabling the free flow of goods, services, capital, knowledge, and people across international borders.

American normative model of legal expertise 393

Legal convergence is an evolutionary and non-linear process, particularly evident in Europe where soft law instruments play a crucial role in harmonizing various legal systems Notable examples include the Draft Common Frame of Reference (DCFR) and the Principles of European Contract Law (PECL), which have gained significance as courts frequently reference them, leading practitioners and scholars to consider them as legitimate sources of law.

Thus, there is a spectrum in which globalization operates that measures the degree to which barriers can or should be broken down

Some barriers can be more advantageous when maintained rather than removed, as they help safeguard the sovereign rights of nations in the face of increasing globalization A clear example of this is the licensing and regulation of attorneys, which serves to protect legal standards and practices that could be compromised in a more interconnected legal framework.

The European Court of Justice (ECJ) has ruled against the notion that in-house counsel can operate independently from management, as it declined to broaden attorney-client privilege to include communications with in-house lawyers.

The European Court of Justice (ECJ) distinguishes the position of company lawyers from that of external lawyers due to the economic dependence and close ties company lawyers have with their employer Despite being registered with a Bar or Law Society and adhering to professional ethics, a company lawyer's role as an employee limits their ability to maintain professional independence, as they must align with the commercial strategies of their employer Consequently, communications between commercial managers and company lawyers are not protected by legal professional privilege.

393 Sida Liu, The Legal Profession as a Social Process: A Theory on Lawyers and Globalization, 38 L AW & S OC I NQUIRY 670, 682-85 (2013)

394 S TUDY G RP ON A E UROPEAN C IVIL C ODE & A CQUIS G RP , P RINCIPLES , D EFINITIONS AND M ODEL R ULES OF E UROPEAN P RIVATE L AW , D RAFT C OMMON F RAME OF R EFERENCE

(DCFR): O UTLINE E DITION (Christian von Bar et al eds., 2009) (ebook)

395 P RINCIPLES OF E UROPEAN C ONTRACT L AW : P ARTS I AND II (Ole Lando et al eds., 2000); P RINCIPLES OF E UROPEAN C ONTRACT L AW : P ART III (Ole Lando et al eds., 2003)

396 Case C-550/07 P, Akzo Nobel Chems Ltd v Eur Comm’n, 2010 E.C.R I-08301

The European Company Lawyers Association (ECLA) serves as a vital organization representing the interests of over 70,000 company lawyers across Europe This association, which has been active for more than 30 years, aims to enhance the role of in-house lawyers within corporate structures ECLA provides a platform for collaboration among national associations, addressing contemporary legal challenges and promoting best practices within the profession The association's mission focuses on influencing policy-making bodies and fostering a greater acceptance of the importance of legal counsel in corporate environments.

The European Company Lawyers Association's White Paper, “Company Lawyers: Independent by Design,” emphasizes the urgent need to reevaluate the role of legal functions in today's globalized economy It asserts that strong companies require robust legal departments that prioritize compliance and ethical standards Furthermore, it advocates for legal professionals to maintain independence while serving as essential business partners and advisors to management.

As Chayes and Chayes chronicled happening earlier in the United States: 399

Company lawyers have significantly increased their influence through innovation by becoming more visible and present within their organizations They have honed their leadership skills, fostering creativity and enhancing their interaction abilities Additionally, they have cultivated a strong sense of ethical values, which has bolstered their reputation for trust and accountability.

In-house counsel play a crucial role in collaborating with managers to promote integrity within firms, yet it is important to recognize that unregulated entrepreneurialism may hinder this objective.

Company lawyers strive to be seen as trustworthy leaders, responsible for creating internal policies and codes of conduct They must act with care, confidence, and wisdom, which are essential for maintaining independence Integrity is a fundamental trait in this profession, shaping how lawyers are perceived within their companies and society It is not a burden but a guiding principle that fosters an optimistic outlook on independence This shared commitment to integrity and objectivity is deeply embedded in the ethics of company lawyers, serving as both a professional standard and a philosophical ideal Unlike typical employees, company lawyers embody a unique role that emphasizes their dedication to these values.

Company lawyers have a unique opportunity to leverage their training, ethical standards, and professional guidelines to make a significant impact in their field It is essential for them to recognize and assert their distinct role in addressing various issues, demonstrating that their contributions can lead to meaningful change.

In-house counsel should be granted the same attorney-client privilege as outside counsel, as both share similar legal and ethical responsibilities This parity ensures that clients receive equal protections, fostering candid communications and enabling effective legal representation.

The Anglo-American Nexus

The Anglo-American legal relationship, once dominated by American leadership, is now shifting towards national parity, as highlighted by John Flood He identifies key factors contributing to the initial disparity in global legal prominence between the U.K and the U.S., including the limited litigation experience of U.K solicitors, the smaller domestic legal market, weaker ties with major financial firms, and fewer established foreign offices However, recent reforms in the British legal system, such as allowing solicitors to appear in court without barristers, the Legal Services Act of 2007 enabling diverse ownership of law firms, and the resurgence of the U.K financial sector, have significantly reduced these disadvantages, positioning U.K firms to compete more effectively with their U.S counterparts.

402 Bagley & Roellig, supra note 212, at 120

403 John Flood, Lawyers as Sanctifiers: The Role of Elite Law Firms in International Business Transactions, 14 I ND J G LOBAL L EGAL S TUD 35, 54 (2007)

404 See John Flood, Institutional Bridging: How Large Law Firms Engage in Globalization, 36 B.C I NT ’ L & C OMP L R EV 1087, 1090 (2013) (“[U.K law firms] are now on par with U.S firms.”)

In 2014, job openings in London's financial sector surged by 18%, with a notable 22% rise in the last quarter, marking the largest increase since 2010, according to Ambereen Choudhury from Bloomberg Business.

Investment and venture capital in the legal sector can foster efficiencies and innovations that disrupt traditional legal practices, ultimately benefiting clients and consumers In contrast, legal systems that fail to adopt these advancements, such as those in the United States, may face competitive disadvantages by missing out on these transformative innovations This interconnectedness is reinforced by shared international characteristics.

The common law system, recognized for its adaptability to the dynamic nature of globalization, is widely utilized across various jurisdictions This legal framework is complemented by robust financial centers that hold a global leadership position Additionally, the ability to think locally while executing operations on a global scale enhances strategic advantages Furthermore, a rich history of involvement in transnational legal transactions underscores the importance of these elements in today's interconnected world.

In-House Counsel in Sweden

Globalization scholars suggest that general counsel in Continental Europe and the BRICs may adopt the American-Anglo model, leading to potential moral hazards similar to those identified by Nelson and Nielsen regarding the American entrepreneurial lawyer However, there is limited data on this topic, prompting us to conduct an original study on the role of general counsel in Sweden As a small Scandinavian nation with over nine million residents, Sweden is characterized by its international neutrality, extensive social welfare system, and wealth driven by exports Remaining neutral during both World Wars allowed Sweden to avoid significant reconstruction, positioning it as a major exporter amid the trade barriers faced by other nations Since World War II, the Swedish economy has thrived on its openness and trade relationships.

Sweden's economy is heavily reliant on exports, contributing nearly half of its GDP, in stark contrast to the United States, where exports account for approximately 13% of GDP The country's primary export products include refined petroleum, pharmaceuticals, mobile phones, vehicles, and vehicle components.

410 See Sweden in Figures, E XPORT GOV , http://www.export.gov/sweden/doingbusinessinsweden/swedeninfigures/index.asp

[perma.cc/BL3Y-QZ2Q] (last updated Mar 21, 2011) (listing facts about Sweden); Sweden

Population 2015, W ORLD P OPULATION R EVIEW , http://worldpopulationreview.com/countries/sweden-population/ [perma.cc/P83X-X9QQ] (last visited Jan 31, 2016) (detailing Sweden’s population)

411 4.8 World Development Indicators: Structure of Demand, W ORLD B ANK , http://wdi.worldbank.org/table/4.8 (last updated Oct 9, 2015)

412 Alex Simoes, Sweden, T HE O BSERVATORY OF E CON C OMPLEXITY ,

The primary clientele of the company is situated in Western and Northern Europe, along with the United States and China Sweden's banking sector is notably concentrated, with the four largest banks—Nordea, Svenska Handelsbanken, Swedbank, and SEB—holding 80% of the total assets Additionally, approximately 70% of the Swedish workforce is unionized.

In 2014, out of 4.59 million employees in Sweden, approximately 3.79 million worked in the service industry Sweden boasts a diverse array of successful companies, including ABB Ltd., AstraZeneca, Ericsson, Skanska, H&M, and Spotify, excelling in sectors such as engineering, pharmaceuticals, communication technology, construction, retail, and media However, the legal market has not kept pace with these corporate successes, as only twenty-three of the top fifty law firms employ more than fifty lawyers, and just thirteen have over one hundred attorneys Sweden's legal framework allows anyone to practice law without formal education or bar admission, and individuals can represent themselves or others in court The Swedish Bar Association, established in 1887, grants its members the exclusive title of "advokat," making them the primary legal representatives in court despite the open legal practice.

The Swedish Bar Association prohibits in-house lawyers from http://atlas.media.mit.edu/profile/country/swe/ [perma.cc/5TF2-TUFL] (last visited Jan 31,

413 Id.; Sweden in Figures, supra note 410

414 List of Banks in Sweden, B ANKS S WEDEN , http://bankssweden.com (last visited Jan

415 Working in Sweden: Workers’ Rights and Unions, S WEDISH I NS , http://work.sweden.se/living-in-sweden/workers-rights-and-unions/[perma.cc/C6VW-63ZG] (last visited Dec 29, 2015)

416 Employment by activities and status (ALFS), OECD, http://stats.oecd.org/index.aspx?queryid85 [perma.cc/RQM2-F36K] (last updated Nov

417 Friederike Heine, Sweden: It all goes around again, L EGAL W EEK (Apr 15, 2010), http://www.legalweek.com/legal-week/analysis/1601229/sweden-it-goes [perma.cc/J93J- XJTS]

418 The Swedish Bar Association, 46 S CANDINAVIAN S TUD IN L AW 323, 323 (2004)

420 About Us, S WEDISH B AR A SS ’ N , https://www.advokatsamfundet.se/Advokatsamfundet-engelska/About-us/ [perma.cc/YY4X- LHYZ] (last visited Jan 31, 2016)

To become a member of the Swedish Bar Association and maintain their title, advokats must either work for or establish a company with another advokat This necessary separation from non-legal management is considered a fundamental principle of professional independence.

The Swedish Bar Association has made significant changes to its admission rules, reducing the required practice period from five years to three years for law school graduates, effective January 1, 2011 This shift aims to enhance the competitiveness of Swedish attorneys in comparison to their European counterparts.

In 2010, the Swedish Company Lawyers Association conducted the Swedish Survey, an electronic questionnaire designed by Christophe Roquilly from ADHEC Business School and Boel Flodgren from Lund University, targeting over 900 members This survey featured forty-six questions focused on the roles of in-house lawyers (IHLs) within Continental Europe, receiving seventy-nine responses, with sixty-seven participants answering all questions While companies requested anonymity, they represented a diverse array of Sweden's leading firms, with annual revenues ranging from €5 million to €50 billion; notably, thirty-four companies reported revenues exceeding €1 billion across various sectors such as financial services, telecom, and media Among the respondents, 55% were established over fifty years ago, 35% were between eleven and fifty years old, and 11% were ten years old or younger.

The number of International Holding Locations (IHLs) employed by Swedish respondent companies varied significantly, with 11% employing one IHL, 46% employing between two to ten, and 20% employing between eleven to thirty A smaller percentage of companies employed a larger number of IHLs, with 6% employing between thirty-one to fifty and 14% employing more than fifty-one In terms of IHLs based in Sweden, the number ranged from zero to thirty, with a notable 73% of Swedish respondent companies having IHLs within the country.

425 I NT ’ L B AR A SSOC , Professional Qualifications for the Legal Profession in Sweden,

B AR I SSUES C OMMISSION (July 27, 2011), http://www.ibanet.org/Document/Default.aspx?DocumentUid39B706D-B166-4644- BD67-C8E5477876D7 [perma.cc/9NCZ-UP6Q]

The survey data, along with the cover letter, is available from the lead author In Sweden, respondents reported having between two to ten International Humanitarian Law (IHL) professionals Notably, 56% of Swedish respondents indicated that their first IHL professionals were hired between ten to fifty years ago, while 33% reported hiring them within the last ten years, and 11% noted that their first hires occurred more than fifty years ago.

A recent survey revealed that 28% of Swedish respondents hired thirteen or more external law firms in the past year, while 25% engaged four to six firms, and 20% hired two to three Additionally, 64% of respondents disagreed with the notion that non-lawyers in their firms communicate directly with outside lawyers On the other hand, 57% of participants felt that external lawyers have a solid understanding of their hiring firms' businesses, with 23% expressing disagreement on this matter.

The Swedish Survey findings align with Nelson and Nielsen's research on American lawyers, revealing that 75% of the 71 Swedish respondents identified primarily as counsel, with 21% viewing themselves as entrepreneurs and 4% as cops In comparison, 50% of American lawyers categorized themselves as counsel, 33% as entrepreneurs, and 17% as cops Additionally, 68% of Swedish respondents strongly agreed that their roles were "service oriented," while 17% agreed and 3% remained neutral.

In a survey of seventy-one Swedish respondents regarding the primary mission of the legal department, participants rated various options on a five-point Likert scale, providing valuable insights into their priorities and perspectives.

• To advise the rest of the company on legal matters: 4.45

• To propose solutions in order to make easier or to achieve the completion of a project: 4.28

• To contribute to value creation by the company: 4.28

428 Here and elsewhere numbers may add up to more than 100% due to rounding

429 Nelson & Nielsen, supra note 109, at 464-65

430 The text of both the survey and the cover letter are on file with the lead author

431 Nelson & Nielsen, supra note 109, at 468

In a survey of seventy-one respondents regarding the roles of in-house lawyers (IHLs), 90% identified responding to legal queries with legal advice as the most frequent task, while 6% ranked proposing new legal solutions second Additionally, 4% prioritized anticipating the needs of managers, and 65% considered helping formulate business strategy as the least frequent role When asked about their work structures, 44% of respondents indicated that serving on integrated project teams was the most common, followed closely by 42% who preferred working with specific business units on a permanent basis, and 39% who focused on legal issues independently.

A survey of seventy-one Swedish respondents revealed insights into their companies' political lobbying activities: 54% engage in lobbying to anticipate specific proposed legislation or regulations, while 44% respond to enacted legislation or promulgated regulations Additionally, 31% indicated that their firms do not participate in lobbying at all, and 28% actively lobby to influence public policy, irrespective of pending legislation or regulation.

Among the seventy-one respondents, 51% collaborate with trade or industry associations to promote their political interests, while 37% create position papers or technical reports Additionally, 35% participate in face-to-face meetings with regulators at both state and federal levels Interestingly, 34% reported no involvement in political lobbying activities, contrasting with the 31% who indicated otherwise Furthermore, 7% hire external counsel with lobbying expertise, another 7% hold press conferences, and only 1% serve as experts in legislative matters.

Sixty-four percent of the Swedish respondents indicated that their firm has a legal culture Descriptions varied:

• “Do more or less everything legal”

The Application of Our Prescriptions Outside the United

C ONCLUSION

The role of general counsel in corporations is at a pivotal moment, facing a choice between perpetuating detrimental entrepreneurial behaviors or striving for the esteemed lawyer-statesman ideal This article promotes the latter, advocating for a combination of legal and strategic astuteness as essential remedies to address the current challenges faced by general counsel, ultimately enhancing their effectiveness and integrity within the corporate landscape.

Business managers and their legal counsel can enhance corporate compliance and sustainable value by collaborating as strategic partners, combining legal acumen with business strategy Legislative measures like the Foreign Corrupt Practices Act and Dodd-Frank have proven insufficient in curbing risky and illegal behaviors, highlighting the need for both counsel and corporate clients to actively foster legal and ethical compliance Managers must develop legal literacy and demand strategically savvy lawyers, as many business graduates are not adequately prepared to handle legal and ethical challenges Conversely, lawyers often lack the necessary business insight to contribute effectively to value creation Both law and business schools play a crucial role in bridging these gaps by promoting ethics, legal understanding, and informed decision-making.

Counsel must collaborate closely with managers to generate tangible value, allocate resources effectively, and mitigate both business and legal risks, while also ensuring they are not unduly influenced by their managerial colleagues This responsibility extends to all individuals within the firm, reinforcing the notion that leadership behavior significantly impacts organizational culture As former Texaco CEO James Kinnear stated, “fish rots from the head,” highlighting that both lawyers and managers are more swayed by their leaders' actions—such as hiring, promotion, and compensation practices—than by mere words This raises critical questions about the treatment of whistleblowers and the consequences faced by employees who engage in unethical practices, regardless of their performance.

The evolving role of in-house counsel outside the United States poses a risk that counsel will fall prey to the ethical pitfalls of Nelson and