top
of mind
®
“Is there a new paradigm for
practicing preventive law?”
“See the shapes of problems.”
EVERY GENERAL COUNSEL KNOWS THE IMPORTANCE
of preventive law — the notion that effective client counseling
requires anticipating and preventing problems, not just
resolving problems as they arise. Truly effective general
counsel become conversant with a wide range of legal
specialties and study the industries in which their clients
operate. This knowledge allows them to identify problems that
have befallen others and craft compliance programs that help
clients to avoid these problems in their daily operations.
Recent events call this traditional preventive law paradigm
into question. Assisting your clients in identifying and avoiding
problems is no longer sufficient: The 21st century general
counsel must look around corners and see the shapes of
problems that have yet to emerge but are latent in areas
of the law that may have been viewed in the past as noncontroversial. A general counsel’s “risk detector” must be more
finely calibrated then ever — understanding how previously
benign practices have the potential to be viewed in a harsher
light in a rapidly evolving legal environment. Of course, this
ability to see newly emerging compliance threats must have
the balance necessary to avoid paralyzing the client by seeing
compliance bogeymen in every business transaction.
The options backdating scandal provides a good example
of the new paradigm. Given the number of companies
caught up in the scandal — over 100 companies are either
under investigation or defendants in derivative actions — it is
apparent that many general counsel did not perceive risk in
the practice of awarding options with effective dates chosen
to maximize value to executives. Under the old paradigm, it is
hard to fault a general counsel who failed to counsel against
such practices since the practice was apparently widespread,
and no company had ever been investigated or even
criticized for this practice. Yet many of the general counsel
at companies under investigation have had to resign or find
themselves the targets of criminal investigations.
Meeting the demands of the new paradigm will require
a keen focus on continuing legal education and regular
consultation with subject matter experts in leading law firms to
develop a highly nuanced understanding of emerging legal
trends. Only by leveraging all of the available resources can a
general counsel thrive in the new paradigm of preventive law.
Each month, K&L Gates presents Top of Mind®—a leading
in-house lawyer’s take on key issues shaping business and
legal strategies.
Michael J. Denton
Vice President, General Counsel
and Corporate Secretary
Curtiss-Wright Corporation
Roseland, New Jersey
w w w. k l g ate s . c o m
Kirkpatrick & Lockhart Preston Gates Ellis LLP
1 4 0 0 l a w y e r s o n t h r ee c o n t i n e n t s