On Lawyer CEOs

by F.

Home Depot and Pfizer now have CEOs with law degrees. In today’s WSJ, Alan Murray uses this fact as a lede, then goes into a discussion of whether lawyers are good CEOs—or any better than the alternative.

That’s not a very interesting question, I don’t think, since by the time you are a CEO, your 3 year law degree is 20+ years in the past and almost totally irrelevant to your job (if it ever was relevant). More interesting is that these companies may have turned to lawyers for the sake of appearance:

Lawyers are trained to foresee risk, making them well-suited for times of trouble. Perhaps more important, they understand what it means to be a fiduciary, acting in trust on someone else’s behalf. Messrs. Nardelli and McKinnell clearly failed to grasp that basic tenet of public-company leadership.

But some see this trend as one more cause for concern about the direction of the business world in the post-Enron era. “It’s a sign of the times,” says Philip Howard, a lawyer himself and a relentless crusader for legal overhaul who wrote the book “The Death of Common Sense.”

“We’re more concerned with legal compliance than with getting the job done. If you have an economy where people circle the wagons and try and prevent anything bad from happening, the economy will suffer.”

I think there may be something to this. The culture of compliance that Howard ridicules is, I think, worthy of ridicule. I remember at My Former Employer when SOX hit. Suddenly, we had a “Compliance Officer.” I thought, “Who the fuck is that guy?” Did he have special training? No. He was an employment/HR lawyer with a new title. One day he’s processing H1B visas, the next he’s a compliance officer. Of course, the big question was, “Comply with what?” Having a “chief compliance officer” is like having a “making money officer.” How could one person ensure that the company complied with every rule, law, norm, regulation, and custom in all the various divisions and in all the markets where the company did business? That sort of centralization is, in my experience, difficult if not impossible to achieve.

So why do it? It’s largely a PR ploy. The compliance officer is like the “chief security officer”—a punching bag for disgruntled outsiders. “Oh, you’re pissed off that we dumped 3,000 barrels of toxic putrefaction in that bunny habitat? Talk to our compliance officer. He’ll emote with you for a while.” This person’s job is to sit and listen, take some notes, and then report back to the CEO and senior management. Will anything happen? Probably not. But listening to pissed off people calms them down. It’s a shrewd strategy.

The same ploy works in negotiation (or in managing others). Often the other side just wants to feel listened too. That’s it. When my wife and I redid our house, we talked about this with our contractor, a very experienced guy who’d negotiated with a lot of irrational, pissed off clients. Usually his clients were couples, and often the man (of course) would want to “say his piece” about some contractual provision or whatever. Our contractor rarely changed the terms of his contract—it was take it or leave it, basically. But rather than play hardball or be rude (not a good idea), he would just let the husband act like a big swinging dick for a few minutes. The husband would hitch up his pants, stick out his chin, and show he could read legalese (“What I’m concerned about, Bob, is Section 3.1, Sub A, romanette (ii), where it says…”). Then after this display was over and he was talked out, the couple would sign—same terms as before.

Listening can make problems vanish. It’s amazing how much people want to be listened to, and it’s a pretty cheap solution. (Maybe that explains why there are so many blogs?)

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