In England, the accountants rule. But it’s the lawyers who are dominant in business in the United States.
I work in England under the rule of accountants and they call the shots in business here. For a profession that has zero television shows made about it, accountants really do command a lot of screen time in the office and in the board room. But ‘LA Accountant’is never going to make prime time.
Tom Kilroy (@kilroyt), general counsel at the English-headquartered global software company Misys, wrote about how lawyers need to understand finance to be taken seriously in business. Tom’s right - lawyers need to do more than understand the numbers. I think it needs to go further and the general counsel should work closer with the chief financial officer, more than one might think.
General counsel can learn a lot from the chief financial officer because finance and opinions applied to strategy are not taught at General Counsel School.
The CFO mixes business strategy with legal guidance and creates solutions for a company. The CFO adds real value to the business beyond necessary functional cost centre. For example, a lawyer understands obligations that a board must comply with. The CFO understands how those obligations are applied. A lawyer knows that a contract needs payment obligations. The CFO understands the mechanics and timings of how to implement the clause.
A good CFO will understand the numbers and ensure cashflow but will also feed that into business strategy to equip senior management and a board to make decisions. A good CFO understands business strategy and in what order to execute a plan. A good CFO will empower staff with the right mix of responsibility and controls that will allow a company to function inside understood risk parameters. Put simply, a good CFO understands risk and when to take some.
Lawyers naturally feed into the business strategy as well, but from what I see are more removed from the business core – aloof even – proffering frameworks that are legal but lack nuanced understanding of what the board should do with the legal information. Lawyers will naturally try to run a risk-elimination strategy – great for law, not always that beneficial for the business.
CFOs will usually have more exposure to the board room because they present financial reports to the board. They get to glean first hand how a board functions and learn how to present information in a manner appropriate to the board. A general counsel will need to be aware of that dynamic when presenting to the company’s board.
I take every opportunity I can to seek the CFO’s input before presenting legal reports to the board – the guidance is invaluable and usually starts with “the board will expect to see…”. Now, instead of presenting a legal analysis, which is just one part of the legal report to the board, I try to begin sentences with: “Based on my analysis and experiences, I would recommend that…”.
Deliver a legal solution, with options, and in doing so be clear, concise, sharp and to the point. Doing that, more often than not, elicits a directive from the board to implement the recommendation.
Brett Farrell is general counsel at Media Ingenuity