Attendees at the October 26 compliance readiness seminar will have a rare opportunity to benefit from the experiences of the major players in installing at MCI an outstanding model of best compliance practices.
The cover of last month's issue of The Metropolitan Corporate Counsel featured an interview with Dick Thornburgh. He mentioned six significant lessons for chief legal officers based on his experiences as one of the examiners in the WorldCom/MCI bankruptcy proceedings.
On the cover of this month's Special Report on Compliance Readiness, Stasia Kelly, the former Executive Vice President and General Counsel of MCI, comments on the same six lessons drawing on her experience in building the legal and compliance functions at MCI.
In their article on page 27 of last month's issue, Jim Ewing and Jerry Kral of Duff & Phelps, LLC, who served as consultants to MCI in connection with the reorganization of its compliance functions, discuss elements that are the keys to those functions.
On page 34 of this issue, you will find a review of Sarbanes-Oxley Act: Planning & Compliance, a treatise written by lawyers from Kirkpatrick & Lockhart Nicholson Graham LLP (Dick's firm). It is an impressive display of that firm's knowledge of the post Sarbanes-Oxley legal environment.
Applying the six lessons is both easier and harder for our average corporate counsel reader. Easier in that the average reader's company is probably not faced with the kind of organizational shock that WorldCom/MCI suffered. More difficult, because without a similar shock, it is more difficult to change embedded management practices and attitudes.
The difficulty is compounded if the champion of change can be deemed to have a self interest. In these circumstances, bringing in an outside advocate may be essential.
Each of the lessons cited by Dick is of the greatest importance in enabling the CLO to protect her company from compliance failures.
The first lesson that Dick and Stasia discuss is that a general counsel must " Manage" a dominant CEO in the sense that the CEO needs to recognize that the CLO's legal and ethical responsibilities are to the corporation as well as to realize that taking the advice of the CLO concerning potential compliance failures will benefit the CEO in the long run.
The second lesson, Keep the board of directors fully informed, is another important key to managing the compliance function. Without maintaining the confidence of the board, no CLO can be successful.
Dick's third lesson, Supervise your law department, may well be the most difficult to sell, because those executives who have their own lawyers or separate law departments will fight efforts to transfer effective supervisory authority to the CLO.
Selling your CEO on each of the above lessons involves overcoming misconceptions about the role of the CLO or changing entrenched reporting relationships. An outside advocate can be helpful in convincing the CEO that having a strong CLO is essential to the CEOs success and job security. Today, the case is particularly convincing thanks to current examples of CEOs who were ousted because they ignored the CLO's advice or the CLO was not strong enough either to properly inform the CEO or to take the issue up the ladder.
As you consider each of the other lessons discussed by Dick and Stasia, think about how you can use the authority of an outside ally to reinforce your message about the importance of those lessons.
In looking for the best advocates, you may have candidates who have served you well in the past who are already familiar with your company and its legal and compliance concerns. If you need to expand your search, you may want to consider the authors of the articles and interviews to be found by clicking on Compliance Readiness Archives on the home page of our Web site or by reading this month's and last month's Special Reports on Compliance Readiness. All of this information is assembled on our Web site, http://www.metrocorpcounsel.com, conveniently linked to the bios of the authors or interviewees and to any of their other articles or interviews that we have published.
Published October 1, 2006.