First thing we do is kill all the lawyersWhat is the most famous line in Shakespeare about lawyers? That is an easy one because lawyer-haters across the world (and lawyer-lovers as well) know it – First thing we do is kill all the lawyers. It comes from Henry IV, Part II. Most lawyers understand that by killing all the lawyers, it will create an atmosphere that would allow for tyranny and anarchy. Unfortunately this clear import is not as widely seen by civilians (i.e. non-lawyers).

While I think the debate about whether the compliance function should be located in a company’s legal department or in a separate compliance function has largely concluded that it should be independent because of the difference in the two discipline’s mandates; many in a corporate compliance function came from the General Counsel’s office or have legal training. The lack of law schools providing training in leadership skills has led to a paucity of such proficiencies in my brethren.

I was intrigued by an article in MIT Sloan Management Review, entitled “Leading by the Numbers, by Byron Hanson, where he discussed the sometimes difficult transition which financial professionals have to make when moving to broader leadership roles. I found some of his insights to be useful to the lawyer moving from a corporate legal department or large law firm into a leadership role in a compliance department. He listed five changes needed which I have adapted for lawyers.

Transition 1 – From Expert to Leveraging Expertise

Most lawyers feel they are experts in the law, which can be thought of as a technical expertise. Hanson quoted the experiences of Colin Pavlovich, who said, “When I came into a senior leadership role, in the first six months I had to get used to just letting go…that you’re not in a technical role day to day with a set agenda, that you’re a professional manager and need to step away from being the expert to [being] a leader in strategy development and execution.” The key is to recognize that “leadership does not mean a loss of expertise but rather an opportunity to leverage your…skills in a more valued way.”

Transition 2 – From Apprenticeship to Coaching

Many lawyers still learn in the old-fashioned apprenticeship model where you learn through working with and for more “senior professional, who provide a heavy degree of oversight of their subordinates’ work to ensure that mistakes are minimal.” That is certainly true at most large law firms. It is also true that many legal assignments are so large, they can become too complex or even too complicated for a junior lawyer to handle so there is fair degree of oversight involved by senior practitioners.

Clearly this model can build up technical expertise but when a lawyer moves into a Chief Compliance Officer (CCO) role, they take on a broader remit. Hanson wrote, “Delegating, trusting, and empowering are all part of a coaching framework” which must be used for lawyers to add value once they move into a CCO role. You can use your technical expertise to help guide but you will need to allow your compliance team to grow for you to become an effective leader.

Transition 3 – From Reporter to Translator

Every lawyer worth his or her salt can perform triage on a contract, an acquisition or you name the legal issue and report his or her findings from the legal perspective. However, as a leader in the compliance function, your analysis must change from simply reporting on the legal aspects to a mindset of prevent, detect and remediate compliance risks before they arise and after they have arisen. Chief executives rarely need a recitation of the Foreign Corrupt Practices Act (FCPA) as a law; they want to know what the compliance risks are going forward. If the risk is moving into a higher category, can that risk be managed? Your ability as a CCO is to create meaning and simplicity around risk.

Transition 4 – From the Right Answer to Multiple Possibilities

Many lawyers tend to see one right answer for a complicated legal issue. Yet as a CCO you must “navigate complex problems that have multiple plausible answers.” In compliance there will be a wide variety of factors that legal analysis will not take into account. Hanson quoted Paul Sims for the following, “You’ve got to understand your environment and the context in which you’re presenting these numbers [legal analysis] and is that really the right answer? You need to unleash your thinking a bit.” Clearly as risk goes up the management of that risk will need to increase. As your risk management increases you will need to find ways of auditing or monitoring that risk which will aide you in making any adjusts you might need to going forward.

Transition 5 – From Value Protector to Value Creator

This one is probably the biggest challenge for lawyers, particularly those who move from an in-house corporate legal department to the CCO chair. The mandate of the legal department is to protect the company. The mandate of the compliance function is to prevent, detect and remediate. These are quite different. As Roy Snell has said, if lawyers could do compliance, we would not have needed to create a whole new profession.

Yet moving to a CCO role also means seeing the world not simply through a legal lens but also through a business lens. For it is in the value created by compliance that will assure its success going forward. Lawyers must transition their thinking from conservative and risk-averse to how can we get something done in compliance. Moreover, most in-house lawyers have been assigned roles that are essentially legal risk mitigation and stewardship. If a CCO focuses too much on those areas, value creation opportunities will be missed going forward.

The ability to critically think is still the gift that most US law schools bestow on their graduates. That ability can serve you well as an in-house lawyer and as a CCO. However, the mandates of the legal department and the compliance department are so different and in many ways divergent that the transition from one to the other is not always guaranteed to be smooth. Hanson’s article gives some fine pointers that every lawyer should consider when they make the move to the CCO chair.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2016

1 comments
donsinkocpa
donsinkocpa

This is a great summary as to why many successful compliance officers come from operations or internal audit. They know how to apply the law, not just interpret it.