Recent headlines regarding the staffing of internal corporate investigations serve to raise again the question of when it is appropriate for the board to engage outside independent counsel, as opposed to working on the matter with their general counsel or regular outside counsel.
Law and sound governance practice have long recognized that situations may arise from time to time to prompt the prudent governing board to consider the engagement of "independent counsel"; i.e., counsel other than the company's general counsel or regular outside counsel.
An obvious example is where the board seeks expertise in a particular area of law that neither the general counsel nor regular outside counsel possess. Other examples include the presence of credible allegations of wrongdoing by senior management, and transactions that present material actual or potential conflicts of interest by management (e.g., management buyouts or tender offers involving management).
Certainly, internal investigations involving suspected or alleged wrongdoing by employees (especially those with pre-existing relationships with the general counsel and/or primary outside counsel) are typically conducted by independent counsel to the board. In addition, board-driven self evaluations are often conducted by independent counsel, particularly when the protection of the attorney-client privilege is sought.
Current public controversies in the entertainment, broadcasting and technology sectors provide a useful opportunity for the general counsel to revisit the circumstances in which it is appropriate for the board to seek independent legal advice, rather than use its general counsel or regular outside counsel.
When Boards Should Seek Independent Counsel
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
