In The Financial Times (May 19, 2005) Patti Waldmeir speculated about whether corporate directors need independent counsel – not from the law department – only from time to time or whether in our Sarbanes-Oxley world as “some legal experts believe permanent independent counsel will become a fixture.” (See also my post on June 15, 2005 regarding SOX legal costs.) Waldmeir complained about the lack of data on boards hiring their own firms, but she did not lack for opinions on all sides from various experts.
My first thought went to the cost of such counsel, and whether the poor general counsel who is charged with managing all spending on law firms will have any say in board retentions and fees. My second thought went to conflicts of interest, and whether outside counsel retained by the board will be able to know if they are in any conflict situations. Then, too, what about the gap independent retention must create; the board may not want the general counsel even to know about some legal thorns on which it seeks guidance. My final went to the complications that could arise if different directors want their own counselor, or if audit committees, for example, want their own. To quote the Grinch: “He puzzled and puzzled ‘til his puzzler was sore.”