What Is an Outside General Counsel? [Gaille Energy Blog Issue 47]
- Posted by scottgaille
- On June 12, 2017
- 0 Comments
Outside general counsel are outside attorneys (who work for law firms) but take on responsibilities similar to those of in-house lawyers (who are the client’s employees). Some may have served as the chief legal officers of NASDAQ or NYSE corporations but have since moved back to a law firm—often following the merger, acquisition, or dissolution of their former employers. In such cases, their board room experience makes them commercially savvy in topics such as corporate governance (and politics), strategy, finance, accounting, risk management, compliance, and ethics.
Examples of outside general counsel roles include:
- Small Companies with No In-House Lawyers. Small companies rarely have sufficient legal work to support a full-time attorney on their payrolls. Instead, they establish relationships with outside counsel who manage all of their legal needs. The outside general counsel directly undertakes legal work but also helps the client select and manage other specialist attorneys, including employment, securities, and trial lawyers. The business owner works directly with just one lawyer—the outside general counsel. It’s just like having a general counsel, without the payroll responsibility.
- Overflow/Adjunct General Counsel. Even at large corporations, there are only so many in-house counsel capable of running major deals. Rather than hiring an additional in-house lawyer (who may not be needed when the workload subsides), the legal department can retain an outside lawyer as an adjunct general counsel. This adjunct then becomes the principal legal advisor to the client’s commercial team on certain deals, reporting to an in-house attorney. The following figure illustrates how the outside lawyer becomes a de facto part of the client’s legal department:
- Advisor to CEO. This arrangement usually arises in mid-size companies, which may have less experienced in-house attorneys. While the in-house team may be well-suited for day-to-day affairs, the CEO may look to a seasoned outside attorney when material matters arise. The outside general counsel steps in to take on the strategic and consultative role of general counsel until the transaction/crisis has been resolved. The following figure illustrates how the in-house legal department continues to handle routine activities while the outside general counsel manages the major matter:
While serving on The University of Chicago Law School’s Visiting Committee, I had the opportunity to discuss careers with many successful alumni. Those graduating in the 1980s or earlier tended to have one-track paths, working either for law firms or for corporations (almost) all of their lives. Those of us graduating in the 1990s onward have moved back and forth among in-house positions (including both legal and commercial roles), law firms, and government service. What has emerged is a group of highly flexible lawyers, who can more easily and effectively serve clients in the capacity of outside general counsel. As Forbes recently observed, “This is the golden age of the legal entrepreneur, a time when, to quote T.S. Eliot, clients are ‘no longer at ease in the old dispensation.’”
About the Gaille Energy Blog. The Gaille Energy Blog discusses issues in the field of energy law, with weekly posts at http://www.gaillelaw.com. Scott Gaille is a Lecturer in Law at the University of Chicago Law School, an Adjunct Professor in Management at Rice University’s Graduate School of Business, and the author of two books on energy law (Shale Energy Development and International Energy Development).