Thursday, January 25, 2007

Beefing Up The Corporate Counsel


In recent years, as the world was rocked by scandals of multinational corporations such as Enron, questionable practices involving organisations in Singapore have also come under scrutiny.

There was the Asia-Pacific Breweries executive who cheated various banks of some $71 million. Then, China Aviation Oil admitted it had lost $550 million by betting wrongly on oil prices, with its head pleading guilty to failure to disclose the trading loss and deceiving a bank.

Later, it became clear the rot had reached the non-profit sector, with dubious practices at the National Kidney Foundation and, lately, at Youth Challenge, coming to light.

In all these situations, much like the pivotal character in the comic series Where's Wally, one question persists: Where was the corporate counsel or legal adviser? Could either have played a more vigilant role?

Last week, Attorney-General Chao Hick Tin — Singapore's top government in-house lawyer and public defender — addressed members of the Singapore Corporate Counsel Association on the importance of their role in corporate governance and maintaining shareholder and investor confidence.

Chief legal officers and their in-house legal teams must play a critical role in "helping management and the Board enact governance reforms", ensuring "sound systems of compliance", he said. In addition, corporate counsel have a duty to bring questionable management practices to the attention of the highest responsible authority.

"Lawyers who represent corporations owe their duties to the institution, (and) not to any individual within it; this is a basic tenet of all professional ethics rules," he stressed.

This, in effect, makes corporate counsel the moral compass of an organisation.

The Attorney-General's comments are a wake-up call for all directors and senior management in Singapore on the importance of having a proactive corporate counsel in their top ranks.

It is also an alert for those organisations in which corporate counsel appear willing to be tucked away in some corner of the office — keeping to themselves, being generally inaccessible to colleagues and only desiring to be tapped when the odd contract or property deal needs to be reviewed.

Unfortunately, some directors and members of senior management in Singapore, as well as some corporate counsel, do not see the role of corporate counsel — there are an estimated 1,000 here — as broadly as that outlined by the Attorney-General.

This partly stems from the existing guidelines on corporate governance. For example, in the Code of Corporate Governance 2005, the word "law" appears only once — in stating that "directors should receive further relevant training, particularly on relevant new laws, regulations and changing commercial risks, from time to time".

Hence, the role of the corporate counsel appears to be limited to just training directors. Perhaps there is some work here for the Council on Corporate Disclosure and Governance to do.

Another reason is mindset. One director shared: "My in-house lawyer often does not give me a solution. He only tells me what cannot be done and such negative remarks do not help me in running the business."

One corporate counsel colourfully sums up the concerns of his peers: "Firstly, I am not paid enough. Secondly, I think this falls under the purview of my company secretary. Thirdly, taking into account that I have a lean team and about 10 hours of work per day, I can only do so much!"

Even so, it is a good sign that some organisations are already including corporate counsel in their top ranks.

For example, in the National Trades Union Congress, chief legal officer Halimah Yaacob is also its Assistant Secretary-General. Likewise, in the Government of Singapore Investment Corporation, general counsel Chua Lee Ming is part of the management team.

Many such corporate counsel are also now invited to meetings of management, board of directors and even board committees. These can be useful opportunities for corporate counsel to update directors and key officers about legal risks and developments affecting their organisations.

In several financial institutions, the head of legal is also responsible for ethics and compliance — a broad interpretation of a such a counsel's role, says veteran consultant to American corporate legal teams Rees Morrison.

When properly equipped, corporate counsel can play a prime role in championing corporate governance. And it is time more organisations gave better attention to beefing up the role.

Dharmendra Yadav

No comments: