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Two rationale for what should report to the general counsel – “control functions” and independence

“When I was general counsel of Salomon, Inc., compliance, internal audit and credit reported to me. The idea was to put the General Counsel in charge of the control functions, except for risk management.” This explanation came from Robert Mundheim, the former top lawyer of Salomon Smith Barney in Met. Corp. Counsel, Vol. 15, Aug. 2007 at 33. Think about the reach of the term “control functions.” What about environmental health & safety (EHS), risk management, procurement, and international trade? In a company, what function aside from production and selling is not a “control function” (See my post of Sept. 3, 2008: functions of the general counsel.).

Mundheim went further. “Some corporations believe that compliance should report to the business head so that she will feel directly responsible for the effective work of that important function. That approach makes sense, but may not provide compliance with the support for its independence which reporting to the general counsel provides. In addition, since compliance is often faced with making legal calls, there is logic in having it report to the general counsel.” Other functions are “faced with making legal calls,” including workers comp and tax, so where does the logic of independence lead?

No comprehensive definition exists for what should and should not be the charge of a general counsel. These two parameters fall short.

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