Lines are frequently blurred between legal needs and compliance requirements for companies of all sizes. Companies like Theranos and Zenefits are case in point of what can happen when growth is always selected over the legal and compliance needs. Although these are extreme examples, every company needs both a General Counsel and Chief Compliance Officer for at least the following three reasons:
1. Approach with Unique Views
A General Counsel and Chief Compliance Officer tackle situations differently because her role is different. A General Counsel is primarily responsible for “advising and protecting” the company. She does this by doing things like:
- Interpreting the law under specific business circumstances and procedures;
- Counseling business people on strategy considering the legal risk; and
- Managing outside counsel who are specialists in areas such as patents, immigration, or litigation.
A Chief Compliance Officer is primarily responsible to “detect and prevent misconduct” throughout the company. She does this by doing things like:
- Establishing repeatable defensible procedures;
- Protecting whistleblowers; and
- Documenting and testing process throughout the organization.
Together, these two roles can present tremendous value to the business objectives of any organization –particularly those without an existing legal or compliance department.
2. Address Different Problems
The nature of what a General Counsel and Chief Compliance Officer does daily can overlap, but they typically address entirely different problems within the organization. As an example, think about a small technology company looking to sell to a larger organization. In this case, the General Counsel would:
- Review and update the company’s governance documentation such as the bylaws and minutes to permit exploration of the transaction;
- Manage and assess the contracts to verify the change posed no issues to existing users;
- Prepare non-disclosure agreements for use in the transaction with the prospective buyers; and
- Update and roll-out the agreements with employees and board members to ensure there was sufficient protection for the organization
Alternatively, the Chief Compliance Officer would prepare the organization by:
- Review regulatory requirements and prepare the necessary documentation to verify that the transaction can occur;
- Compile and update internal procedures surrounding core business functions for purposes of assisting with due diligence in the transaction;
- Verify protection of and investigate any claims asserted by potential whistleblowers; and
- Respond to and manage administrative actions or investigations into the organization because of the potential transaction.
This is simply one illustration of how both roles work to make the transaction happen, but they are tackling different complexities necessary to the deal. There is some overlap in the underlying tasks in many cases, but there are many practical reasons why companies can and should separate the responsibilities.
3. Division is Frequently Necessary
Small businesses have limited budgets and people frequently wear multiple hats within the organization. This should not always be the case when it comes to the roles of legal and compliance. Think about the following when assessing whether the needs of your company can be met by one person serving both legal and compliance roles:
- Can sufficient time be spent on all the present demands?
- Is objectivity still possible?
- Does the person have the support from leadership to make the necessary changes?
- Is there a roadblock to success that requires higher priority?
- Is it legally required to separate the roles?
Every business is different and not every business requires a full-time General Counsel or Chief Compliance Officer. However, there are times in every organization when both roles are needed and should be filled by different people. Fundamentally, the separation and commitment to the objectives of these roles can mean the difference between success and failure (or in the case of Theranos or Zenefits, jail time).
The Contingent Plan can provide a depth of experienced candidates who can seamlessly work with existing teams with short notice for as long or short as needed. Contact us today to explore how we may be able to help your company grow smarter at any stage.