Risks Of Hiding Your CLO From The CEO
Rather than dismissing legal issues as bothersome, companies need CLOs who make legal an integral part of the leadership team.
Does this sound familiar? A chief legal officer reported directly to a company’s CFO because the CEO didn’t want to be “bothered” with legal matters.
“The CEO refused to get to know me,” my CLO friend told me. “He left me out of key meetings, didn’t cc me on emails, then ignored my advice, saying I hadn’t considered all the facts. We had zero rapport, and I got so frustrated seeing all my hard work so easily dismissed.”
The CEO eventually decided the company no longer needed in-house counsel — yet another mistake, in my opinion, by a CEO who hadn’t understood the value of a modern lawyer from the start.
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Most CLOs Report To The CEO
The above dynamic is only one of several risks CLOs and GCs face when directed to report to the CFO instead of the CEO or a larger executive team. Other potential issues include:
- A conflict of interest if the CFO makes decisions that are sound financially but not ethically.
- A lack of transparency when concerns aren’t discussed with other executive team members.
- A lack of accountability for CFOs not held responsible for any legal issues that arise.
- A lack of trust between the legal department and other executives leads others to avoid consulting counsel on issues affecting the company.
I will add the caveat that a CLO or GC can successfully report to the CFO under the right circumstances. But as most CLOs report directly to the CEO (77% globally; 81% in the U.S.), this situation seems rare.
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The CLO Is An Advocate For The Company’s Legal Interests
CLOs who report directly to the CEO or who are an equal part of a communicative and engaged executive leadership team are part of ongoing discussions. This puts the CLO in the position to pick up on potential legal risks that others don’t have the expertise to recognize.
As regular listeners in the larger conversational loop, CLOs consider input from all relevant stakeholders to become better informed about decisions that impact the company. This is a strategic tactic for creating an overall more inclusive culture and an approach that leads to more accountability for executive leaders.
CLOs can leverage their expertise in areas such as contract law, corporate governance, and data privacy to provide in-depth legal insights no other executive can offer. A CLO who communicates often and with more people can spot potential opportunities that aren’t immediately apparent to others. CLOs can combine legal savvy with a broader business perspective to help companies:
- Act following applicable laws and regulations
- Avoid potential legal issues by addressing them in advance
- Ensure actions and decisions follow the company’s code of ethics
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Rather than dismissing legal issues as “bothersome,” companies need CLOs who make legal an integral part of the leadership team.
What would you do if you were a new CLO told to report to the CFO? How do you ensure others always consider your legal advice?
Olga V. Mack is the VP at LexisNexis and CEO of Parley Pro, a next-generation contract management company that has pioneered online negotiation technology. Olga embraces legal innovation and had dedicated her career to improving and shaping the future of law. She is convinced that the legal profession will emerge even stronger, more resilient, and more inclusive than before by embracing technology. Olga is also an award-winning general counsel, operations professional, startup advisor, public speaker, adjunct professor, and entrepreneur. She founded the Women Serve on Boards movement that advocates for women to participate on corporate boards of Fortune 500 companies. She authored Get on Board: Earning Your Ticket to a Corporate Board Seat, Fundamentals of Smart Contract Security, and Blockchain Value: Transforming Business Models, Society, and Communities. She is working on Visual IQ for Lawyers, her next book (ABA 2023). You can follow Olga on Twitter @olgavmack.
