What is Corporate Governance?
A lot of people (sometimes including yours truly) use the term “corporate governance” without defining it.
Corporate governance is essential for the success of any business. As a public service, here is a definition of corporate governance:
According to Investopedia.com, “Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company – these include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.”
What is a General Counsel?
A General Counsel, or “GC,” is like the family doctor for a business. The family doctor looks after someone’s routine, ongoing health, and then occasionally brings in specialists for things like cardiology or brain surgery.
The GC takes care of ongoing business issues such as contracts, employment law, and corporate governance. The GC then occasionally brings in specialists for things like patent filings or litigation.
How Can a GC Help Manage Corporate Governance Risks?
A GC helps a company’s board of directors, officers, & owners manage a wide range of business and legal risks that fall under the heading of corporate governance, including:
- Authority and Decision Making; Making a Record.
A GC can ensure that decisions are made with the proper authority and are consistent with the meeting and voting requirements contained in the company’s governing documents. Issues of conflict of interest and fiduciary obligations can be addressed immediately. It is essential to have accurate and sufficient records of authority granted and decisions made if legal defense or indemnification are later necessary.
Speaking of defense and indemnification, it often makes good business sense for companies to have Director & Officer Liability Insurance. A GC can help the company select the right D&O coverage. A GC can also help the company lower its D&O premiums by helping implement risk-reduction systems before the company goes out to the D&O market.
Risk Management Recommendation:
Have a conversation with a veteran GC that knows your industry and is licensed to practice law in your state.
Also, watch for Part 2 of this 2-part series for more risk management tips.
Please note: the above post contains educational information. It is not intended as legal advice. Engage an attorney who is licensed in your state to get advice on dealing with any specific legal issue.
© 2019 Michael S. Oswald