Roles and Responsibilities of the General Counsel

Tom McCoy, executive vice president, legal affairs, and chief administrative officer, Advanced Micro Devices, moderator
Craig Nordlund, senior vice president, general counsel and secretary, Agilent Technologies
Martin Collins, senior vice president and general counsel, Novellus
Fred Gonzalez, vice president, general counsel, and secretary, SonicWall

Tom McCoy: We really are blessed today with a great panel. We know you're going to enjoy it. We've come to speak from both the head and maybe more importantly from the heart. One of the things that you're taught even before you set foot in law school is that the law is not about logic. It's basically about experience. One of the joys of the experience of participating in the profession, because I've now touched four decades, is that it's a wonderful thing to study the law, but the trajectory of the law is always evolving and it's basically driven by facts.
It's driven by facts, it's driven by policy, and it's driven by leadership. At the beginning of the day and the end of the day, I believe at least the lawyer profession is all about leadership. Under the mantle of leadership, we have three very strong and experienced people…. You'll find each of these colleagues on the panel to have a piercing intellect, a remarkable ability to articulate, and a wealth of experience in stewarding executive teams in what has become much more of a spotlight position in the executive suite.
Craig, I'll start with you. You've been at this a long time and things have changed. Who are we, what do we stand for, who do we stand for, and what's our trajectory as you see it?
Craig Nordlund: Okay, a lot of good questions. Let me start off by trying to put it into context.
When the Enron house of cards first fell and there was all sorts of discussion about who was to blame, why did it happen, where were the lawyers, I had a conversation with Joe Grundfest at Stanford. Joe told me something that I think captures the moment that led to Sarbanes-Oxley. He said, "Craig, I can explain to you in two words why Enron happened."
And I said, "Okay, Joe, I'll bite. What are the two words?"
"Winona Ryder."
And so I was curious as to why it might be Winona Ryder. If you'll recall, Winona Ryder got in a little trouble at Saks Fifth Avenue for shoplifting. And Grundfest said, "Why did she do it? Well, first of all, she figured she wouldn't get caught. And secondly, if she did get caught, she figured because she was famous, she would get off scot-free. And so he said in the environment in which Enron was operating, Ken Lay and his executive team had that same sort of sense, that they probably wouldn't get caught, but if they did, nobody was punishing white collar crime of that magnitude, and so they'd get off and they could move on successfully to another job."
Well, as we all know, that didn't happen. In fact, the house of cards fell, and SOX came out with all kinds of regulations to try to prevent a repeat and to impose accountability on corporate officers, not just the business officers, the CEO, the CFO, the treasurer, the controller, but also general counsel.
In their efforts to impose accountability…, I think we're seeing a trend line where a giant bull's eye has been painted on every general counsel in America as the guardian of corporate ethics, the guardian of legal compliance, and presumably the all-seeing knowledge base that is responsible for making certain that all things ethical and appropriate happen in corporations. This is reinforced by the rules relating to escalating or up-the-ladder reporting that came out of SOX. You may recall that the Securities and Exchange Commission, at the time they were in the process of doing the rule making, actually had a proposal that, if it had been approved, would have required general counsel who are advising their clients and if they see something wrong and the client refuses to make the change, they would be required then to escalate it to the Securities and Exchange Commission.
Fortunately that rule didn't go into effect, but they stopped at the next level. So we now have these escalation requirements that I think you could argue existed previously, whether it was Delaware law or other model act or other corporate laws, an obligation to escalate it within the corporation because the corporation at the end of the day is your client as the general counsel. It's not the CEO. It's not the CFO. It's not the board members individually. As general counsel, you represent the corporation. Probably where the rule is today is where it was before; it's just been more codified. And more importantly, there's now a documented process for ensuring this happens…. The role of the lawyer generally, both inside and out, has changed so that the role of advocate, which used to be your position, is changing more into the role of policeman. I absolutely do see that happening.
There was a case up in Washington State-and I'm sorry, I don't remember the case name-not too long after the Enron case. This was a situation where the CEO and CFO of a small company get together, and they say, "We're going to miss our numbers unless we can find some money here. And so they started poking around."
And the fairly young general counsel said, "We actually have this other expense you've got to worry about because we have this pension accrual we've got to do in Japan. And so you've got to make this accrual."
They said they would fix it, but unbeknownst to the general counsel, they actually reversed the accrual so they could make their numbers. Fortunately the general counsel was not criminally indicted, but his career essentially was ruined and he had to take a fairly severe penalty from the SEC, basically because he should have known and he should have escalated it to the Audit Committee and he should have known that the CEO and the CFO were going to do this nefarious thing. So there was this burden placed on the general counsel, in this case a general counsel with absolutely no accounting background, to know what the accounting implications were of the action and to take action to do the escalation.
Hence the role of the policeman is really starting to fall on the shoulders of the general counsel. This role of policeman is not completely opposite to the role of advocate because, again, you're advocating for the corporation. If you're representing the corporation, you obviously want it to do the right thing. But the concern is at what point do you pull the trigger? Because everything you do gets judged with the benefit of 20/20 hindsight.
So let me put that into the context of the option backdating scandals, which have touched…lots of companies in the Valley and beyond. How does stock option backdating happen? Well, I can remember early on in my career at one company having the HR people come to me and say, "Craig, you know, we had Joe on our list, and somehow as we were mixing lists and blending things together, he fell off the list. Oh, it's only 100 shares. Can't we just go ahead and add him back to the list at the price that the board approved last week?"
"No, you can't do that." And I explained the accounting implications and all of that. "So if you want to give Joe 100 shares, grant him 100 shares. Grant it today. Grant it at today's price, all will be well with the world. And if you feel like because the price has gone up you have to give him 150 shares, give him 150 shares. But you can't backdate."
That didn't make me very popular with the HR community. And it didn't make me very popular in some cases with some of the managers who felt that this was kind of being overly legalistic. I held this position for my entire career. And I've joked [that the companies I've worked for] are grateful now, but they were mad at me for about 29 years. But it came up this way because part of my role was making sure that they did the right thing, that they had the right thing in place.
Well, what about the general counsel who didn't do that? Or maybe the general counsel who didn't even know this was happening? Maybe the corporate secretary takes the minutes, this giant list of optionees is approved, he attaches the list to the minute book (and the list in many cases is even a computer disk, not even a piece of paper, so he's not reading it) and he relies on HR to give him the right list. What happens if there have been some games with the list? You know, by the time you actually get it in good shape, someone has played some games, added some information. Is that the general counsel's responsibility for making sure that didn't happen? Again, this policing role, where does it end?
Let's escalate this up now to the Audit Committee. Now the audit committee has oversight responsibility. What does that mean? I know my Audit Committee is very concerned about what is their role, how much are they supposed to know? So they want to know processes. They want to know details. They want to know a lot of things that initially I would have said 10 years ago were the province of management, that this almost feels in some ways like meddling by the Audit Committee. It's not oversight; oversight is making sure there's a program. It's not understanding every detail, turning every rock over, kicking it and making sure that everything is working. Oversight today is beginning to sound more and more like audit. And so where is the line when you know you're going to be judged if something goes wrong with 20/20 hindsight?
In a nutshell, for me, what's happening to the general counsel role is the same thing that's also happening to audit committees. It's happening to CFOs. It's happening to CEOs. It's happening to boards generally. You are expected to know more, particularly in a large corporation, than is probably humanly possible to know. You're expected to understand things that may not be within your area of expertise.
And in some cases, it's beginning to feel a bit like the general counsel who's supposed to be the policeman, the gatekeeper responsible for making sure all of this happens as it should, is going to be the fall guy or the fall lady or in any event is going to take the hit because, getting back to Winona Ryder and Sarbanes-Oxley, somebody has to be accountable. It's almost become anti-American to suggest that if something bad goes wrong, there isn't someone at fault. There has got to be somebody at fault.
I think what got people so outraged in Enron and some of these others was that the sense that these guys might get off. Well, as it turns out, that didn't happen. It was bad enough that they didn't get off. But there's precedent where people did get off or people got off lightly for egregious deeds, sort of hiding behind the corporate shell. And so the Winona Ryder defense or the Ken Lay defense-"I know nothing; I'm shocked, shocked to find out these terrible things were going on in my corporation"-is no longer possible. But the follow-on question then is where are the police? Who's policing the organization? And it's the Audit Committee of the board, it's the general counsel's office, it's the chief compliance officer, often the same at or at least the same department, who seem to have this huge responsibility for making sure all of this falls into place.
This, to me, is sort of a troubling trend because we all play a lot in gray areas. It's hard to put on your advocate hat and say, "Well, I think there's some risk doing this. You might be able to do this." One of the things that lawyers are very good at is trying to position you close to the edge of the cliff, but not over the cliff. Now when you're supposed to be giving that same advice and you know you may have some personal liability if you get them too close to the edge of the cliff or part of the cliff breaks away unexpectedly, it's going to ratchet you back to be more and more and more conservative. That may not be all bad for corporate America, but it's a fundamental change in the way law is practiced within a corporation and effectively also probably impacts people practicing law outside in private practice.
Tom McCoy: Are you having any more fun?
Craig Nordlund: I've been very fortunate my whole career of working for very ethical companies. So for me, this is probably less of a problem than at a lot of companies because Agilent, particularly as it spun off of Hewlett Packard, spun off with some very high core ethical values. I work for a CEO who will not tolerate any kind of violations of the standards of business conduct, so the tone at the top is set properly. So in that sense, I feel very, very lucky because I have to say when I was in private practice, one of the things that drove me away from private practice was the representation of a number of clients whose ethical behavior was questionable at best. And I'm pleased to say, at least some of those clients ultimately the firm wised up and fired them. But am I having more fun? No, it's not as much fun. It's much more fun crafting solutions. It's much more fun looking for business opportunities. It is not much fun always looking behind: How do you cover yourself, how do you protect yourself, how do you protect the corporation.? This sort of bunker defensive mentality I think is frankly fairly destructive.
Tom McCoy: Well, Marty, Craig gave you somewhat of a perfect pivot in the sense that he alluded to some of his disappointments in private practice, which led him to Hewlett Packard. You had a long career working for a number of public companies. Now you've had a year of experience walking into a company. That must've been an extraordinary moment with a board and a management team waking up on one day and saying, "We've got to have a general counsel. And we need somebody who knows how to do this." And they gave you that mantle, that appointment. And then how did it go from there?
Martin Colins: Well, to build on a couple of themes that Craig laid out, one, in terms of Novellus specifically and highly ethical people, I'd be remiss to not point out that Bill Sherman, who's in the room, incorporated Novellus when it was incorporated and acted as their outside general counsel for how many years, Bill?
William Sherman: Twenty-two?
Martin Collins: So while Novellus did not have a person inside having a general counsel title, they did have a highly ethical, highly intelligent, highly knowledgeable person acting in that capacity from the outside. So what that goes to is statistically it's easier to play a full house. A full house is a pretty good hand. If you're working for ethical people and you're sitting with a full house, terrific. You've got a higher probability of making money in this round.
But you've got to play the hand that you're dealt. You talk about the term advocate. I actually think of consigliere….I've learned, of course, everything's a bell curve and the argument is about which tail you're in because it's just a statistical set, right? And so if you think of phrases you don't like to hear when you hear people talking about a lawyer, "bickering scrivener," that would not be a good thing to be called, right? So that would be the left-handed tail. But, you know, what's a great thing to be called? Well, "an advocate," sure; I mean, we kind of take an oath to be zealous advocates. But a "consigliere," right? I mean, someone that is turned to for their advice and their judgment, right?
Now you laid out a number of scenarios with respect to stock options backdating. And one that was implicit in there, but better than implicit is actually factually true and correct, is that if you looked at Stuart Nichols, who was the general counsel of KLA-Tencor, and Stuart when he was confronted with the backdating issue went to Wilson Sonsini and said, "What do y'all think of this?" And they had probably developed their learning about that issue. And by that time, they said there were some tax and accounting implications. And Stuart Nichols, the GC of KLA-Tencor, took that memo and forwarded it to his boss in an email and said, "I don't think we should do this."
And what did his boss say? Does anybody remember? "I don't need someone to tell me what the laws are. I need a wartime consigliere. I'm in a competitive business. I'm trying to hire people. You are not helping me. If you are just repeating the law as it's written down by outside counsel, you are not doing your job."
Now we like to believe or there's a feeling that somehow it's different out here, and the California rules of special responsibility are different and actually at times kind of at odds with some other principles. But if you think of people in the Valley,... that's what you want to be. You want to be a trusted consigliere. Well, are you a trusted consigliere to a board of directors? No. That position, that's a one-on-one position with your CEO…. Well, but who's your client? Is your client the CEO? Or is your client the board of directors? We all struggle with that. I mean, if you've interviewed for a position, you read the articles, you've got the dichotomy of who's the client.
To be effective in your day-to-day job, particularly prior to Sarbanes-Oxley and all of these reminders, you needed to be a trusted advisor to your boss or to other C-level people. On the other hand, I think there was a sense- inchoate at the time, I think now concrete-by the board of directors that if there was a really big issue, they would hear about it, particularly if it was an issue that the CEO was wrong about. I think that was semi-fiction. I think legally now there's the expectation that you'll play that role. Now you have a legal obligation to do so. But humans haven't changed. I mean, the position, the role you want to play, what it takes to be effective, to be trusted by your C-level people, none of that has changed. All that's changed is there's now a new set of laws that says if X, you'll do Y.
So let's go back to Stuart Nichols. Stuart Nichols sends this email to his CEO, and his CEO says you've got to do better than that. What's Stuart's responsibility? Well, today, in hindsight it's clear, right? Stuart had to go to the Audit Committee, etc., etc. And now we have laws that clarify that…, and perhaps that was always the case. That's a pretty difficult position to be in.…
A wise mentor of mine once said, "Never solve a problem you can avoid." So, when I came into Novellus, [they interviewed me for the newsletter, and] I actually made a conscious decision to tell people, "I am not the ombudsman. We have an ombudsman. It's not me." Because the first thing you have to do is you have to know about things that might become problems. You've got to be trusted by not only the C-level people, but all of the other people in the organization that might come to you or your people with something. Even if you ultimately have the responsibility, if you lead with, "I'm the police"-- the police never show up to prevent a problem. The police show up after you have a problem. I think you've got to do better than that.
So I think what you have to look for within your organization is opportunities. Full disclosure: the Markkula Center actually is part of training our high impact, high potential personnel on ethics. And one of the positives of that is, as I looked at how we did things in Novellus, you want to encourage things to bubble up, but you have to be open enough at the general counsel position that that they'll bubble up to you before they're problems. If you give people the impression that you're writing it up and then running to the Audit Committee or running to their boss, then what happens is the flow of information shuts down. The problems happen anyway.
As I explained to my reluctant internal clients, the total amount of calories it's going to take you and I to solve this problem, if you don't bring me in the beginning, is going to be greater than the total amount of calories it's going to take me to solve it because I'll still have to solve it after we have it. So we can play it any way you want. You don't have to believe me. But I think that's very important is you've got to have the trust first….
I didn't come up on the litigation side. I came up on the corporate side. And most of the time that I spent with my clients--10 years in New York and five years out here--was convincing my clients why they didn't want something that I think they were about to say that they wanted. Because there's a concept of face. Once people state that they want something or that they will not do something, it takes a lot of energy to get them to reverse that position. So what you want to do as a counselor is figure out, based on the dynamics of the situation, based on the personnel involved, what lines in the sand are about to get drawn or what assumptions people are about to make. Think about what's the optimum, what's the utility curve you're trying to get to and how you can go to your client and say, "You don't really want three years of indemnification there. You don't really want that structure." You do all of your counseling with your client prior to getting on a conference call, right? I mean, conference calls and meetings are Kabuki Theater. You've got to do your work ahead of time.
And so, as I look at it internally, I try to think about what my CEO, what my C-level people, what the problematic people in the organization might do, and try to find a way to keep them from taking positions that the unwind of those positions or the fixing of the problems that those positions are going to cause lead to things like internal investigations and litigators and disclosures.
To be a good advisor--not so much an advocate but be a good advisor--you've got to get deep within the organization. You have to get the trust. If you have a problem, a broken window, call the police, call the litigators. That's fixable. But I think most of your job happens well before all of that occurs. If we don't figure out how to propagate ethics in the culture and we don't figure out a way to get people to come to us sooner, then I think we're not doing our jobs. And that's before we start doing these new jobs that've been assigned to us by the state and federal authorities and some of the courts.
Tom McCoy: Thank you, Marty. Fred, you've worked in a number of different business cultures, and with your strong personality, my guess is you were not a thermometer of culture; you were a thermostat of the culture in each of these organizations. What have you learned? Where is it going? And you might also

Fred Gonzalez: All of my colleagues who are on this panel come from large cap companies. The challenges associated with being a small cap general counsel with respect this area are vastly different than the challenges they face. So I'm going to try to highlight some of the challenges that I face as a small cap GC.
Example: the lack of resources. Take away from this conference: One size does not fit all. Craig indicated he has 55 people in the Agilent legal staff. I have one and a half. We have one person in internal audit. We have no compliance department. We have no ethics department….And from the point of view of number of companies, we are the majority.
Many of the stock option backdating issues occurred within small companies; at least they were small at the time that these activities were happening.
Now that doesn't mean there isn't some commonality. One of the things that I think is common to large companies and small companies is that the GC is viewed as an insider and is viewed as a leader of corporate thought. But that poses problems because when you're part of a small group-the executive staff, the C-suite, whatever you call it-there is greater pressure to belong to the group.
And what you've got to be careful of-and Craig pointed to it and Marty pointed to it and Tom pointed to it-is you've got to avoid lawyers underestimating the risk of suppressing facts solely to preserve internal solidarity. That is a key element that general counsels face no matter whether they're at a large company or a small company. If you look at the facts of general counsel behavior in some of the option backdating issues, you may come away with the conclusion that general counsel didn't meet that burden.
Takeaway two: I do not believe there is agreement on what constitutes ethical behavior. I would point you to an article, actually in the Stanford Journal of Law, Business, and Finance in the Autumn of 2002 called, "Lawyers, Ethics, and Enron." It talks about a study done of students who were going through MBA programs and law schools. And it said-I'm quoting now:
"According to a recent survey of some 400 students by the National Association of Scholars, only a quarter believe that the most common statement about ethics transmitted by professors was that there were, 'clear and uniform standards of right and wrong by which everyone should be judged.' About three quarters believed that the message conveyed was, 'what is right and wrong depends on differences in individual values and cultural diversity.'"
So that says to me that there is not a general agreement as to what constitutes ethics, which I think complicates the problem.
Now in the April 2007 issue of the Harvard Business Review, Ben Heinemann, who's the former general counsel of General Electric, wrote an article called, "Avoiding Integrity Landmines." And I would recommend it to you. I think it is a wonderful article talking about what happened at General Electric over his tenure as general counsel. Bottom line, the notion is to fuse integrity with performance. That's his bottom line. Now what's the problem with that?
My view of the problem with that is the following: Suppose you have a CEO who gets up in front of a worldwide sales meeting and she starts by saying, "I want a high performance culture." Most people say, "Nothing wrong with that," right? "And if you do not meet your performance metrics, you will no longer be part of the team." Okay, most people would say you want high performance cultures; that's a good thing. Right after that, she says, "And I want an organization of the highest ethics. And if you are found to be violating the ethical constructs of this company, you will no longer be part of the team." Well, that sounds pretty good. Ethical component, financial performance, fusing those two sounds like Ben Heineman revisited.
Problem in my view: Darwin, survival. I'm a salesperson. I'm sitting there. I'm going, "Well, wait a minute. Now if I don't meet my performance metrics, I'm sure to be gone. But if I don't do things ethically and meet my performance objectives, they may not catch me." And so when you look at fusing integrity with performance, a CEO or other executive has got to be clear that they don't send the wrong message. To borrow a line that came out of the option backdating, is it illegal if you don't get caught? Well, my comment, is it unethical if you don't get caught? And I think people viewing this as a Darwinian problem might say,"No. As long as I survive, I'm okay." I don't think that's the message that corporations, large or small, ought to send.
So what's interesting I think, and common among all of us is the role of the general counsel as a gatekeeper. Craig mentioned it, Tom mentioned it, Marty mentioned it. And I think that's true. I think the SEC looks at the general counsel as a gatekeeper.
I think that the general counsel is uniquely positioned to set the tone of the culture of the company. But it's important to recognize that in a small cap company, the challenges are, you don't have the resources to make sure you've got all of the ethical issues covered. You're hopeful that other people that you rely upon can come to you in enough time to be able to handle these issues.
In a large company, I think it's less a problem of resources. But the general counsel has the potential of becoming, as I said, incurious and isolated from these matters by layers of bureaucracy that remove him or her from what actually is happening in the company.
So whether you're large cap or small cap, this job is as challenging as it has ever been. As Tom posed to Craig, are you having more fun? The answer is no. In my view, this is not as good a job as it was when I first became a general counsel.
William Sherman (Morrison Foerster): So now that we're burdened with strict liability in occupying the general counsel position, what kinds of things can we do differently, should we be doing differently, in order to extend the influence as far as we can across the waterfront of the enterprise, mindful of the fact that there are only 24 hours in the day and our resources are limited? What kinds of things could we be doing differently? What kinds of things should boards be expecting us to do differently in order to occupy a position of far greater influence given our far greater accountability for what goes wrong, whether we're responsible for it or not?
Any thoughts?
Fred Gonzalez: I think Marty said it very well in the sense that general counsel are daily walking this tightrope of being the counselor, the trusted advisor, with this knowledge that at some point they're also the gatekeeper or the police. How do you do that balance because he's absolutely right: If you are totally reviewed as the police, you get shut out and you will never find out what's going on until something bad happens.
On the other hand, you can swing too far to the trusted advisor and you give in to the CEO who says, "Don't tell me what the law is. Everybody else is doing this and find me a way to do this because I don't care what the law says. I'm competing for talent. I've got to backdate these options or I can't get these people."
There has to be some way to balance that trusted position so that when you draw the line in the sand, the CEO understands and appreciates that he or she can not cross that line. I don't have a magic formula for doing that because frankly, you're dealing with human beings. Every CEO personality is very different. If you're dealing with Larry Ellison, you've got a very sophisticated individual.

Martin Colins: And in many of these small cap companies you have founder CEOs. You know, great scientists, maybe even brilliant businessmen, but also they start drinking their own Kool-Aid, as well, and start thinking that their way is always the right way. So how do you build that wedge and walk through that fairly dangerous path? You've got to build an element of trust or their door is closed to you always.
To me, it's constantly walking on this very narrow tightrope trying to figure out how I balance that advisor role, police role, ethics role. And that is the game that we play. The successful general counsels are the ones who are able to navigate that very difficult path. But frankly, the ones often who are having the most trouble, it's often not necessarily their fault. Often it is a CEO who will not listen, a CFO who will not listen, maybe even a board that will not listen. At that point, your only choice as a general counsel is to exit and not stay around for the ensuing disaster. You always had the theoretical possibility that you would actually have to resign rather than move forward. But it was-it used to be more theoretical than it is today. Today I think that touch point where you have to say I can't work here any more, is coming much sooner in the process.
One of the requirements to be a general counsel today is to have a currently updated resume and know on Quicken how long you're good for…. If you look at just basic human nature, things that create respect, one is the ability to walk away. Now with construction costs at $300 a square foot and land costs at $500 a square foot, that's tough. But I think you really have to be able to walk away….
I think the GC can be or should be viewed as not having an angle….In order to do that, you really have to maintain your independence. One of the ways you maintain your independence is knowing, you know what? This might be an adventure, but really, this is a job. I'm going to have my career after this. I'm going to have my credibility after this. You don't have to think about that. Like if you're thinking about that every day, you should just get another job.
The last thing-and I should've mentioned this earlier--you need to be trusted by your existing C-level people but great general counsels outlast their CEOs. So you need to be trusted by the person that's currently in that chair, but if the person who's in that chair or any series of chairs changes, we all have to be dispassionate….
Tim McCoy: I went to Hector Ruiz, our CEO, several years ago, and I said look, I want you to publicly give me the culture of the company. I want you to give it to me, and I want everybody to know that I occupy that position of authority over the culture.
And he gave it to me. Then I've used that opportunity in all of our HR leadership training programs-I'm the closer. I give the expectations: What does AMD want from its people? What do we want from our leaders? Who are we? What do we stand for?
I've taken it upon myself to lead the education on the utility of mission/vision/value statements as a decision making tool, as a touchstone for decisions. The internal communications function of the team reports to me. I asked for it. I took it and I renamed it "employee culture and communications." I took a senior PR person to come in and run it. We are transforming that organization to be a cultural tool of education so that , particularly as the company grows, particularly dealing with all of the geographical challenges, we can optimize our chance to unify the company, unify the people around the world around a culture of integrity that is passionate about the strategy….
So there are things that you can do, but you have to be lucky to some extent. For more people to have the kind of opportunities that we have for leadership in our companies, it really does require a lot of cooperation. You need very effective outside counsel who have strong relationships in the Valley with CEOs, with the venture capitalists, with the guys on the board, to take a leadership role in educating CEOs as to what it is that they're supposed to do and how it is that they should be using and conceiving of the role of the general counsel.
Because the problem we have in the Valley, we have too many general counsels who are not in fact the general counsel. They are just the first lawyer. And there's a difference between being the first lawyer and being the general counsel. There's a difference between being somebody responsible for a function and somebody who is being responsible for the ethical outcomes and compliance outcomes of a public company.
As we get pushed more and more into this unhappy position of sort of the strict liability gatekeeper, I think one of the reasons why we're not having as much fun is our boards of directors aren't having as much fun. They're more worried about CYA rather than pedal to the metal on the strategy, and that really does make our jobs a lot less exciting than they used to be.
But we're not going to get there from a Silicon Valley perspective until we really have a much more effective partnership, in my view, amongst the lions of the law on the outside counsel, and we need more leadership from the bench. We need to have a very healthy discussion, an educational discussion for the people who have this servant-public figure responsibility as the CEO of a public company or a company that's trying to go public as to the role of the general counsel and how you use that role effectively to be a successful chief executive officer exactly the way that a responsible board of directors would want a chief executive officer to behave.

This is an edited transcript of a panel presented to the Business and Organizational Ethics Partnership at the Markkula Center for Applied Ethics