Of lawyers becoming CEOs

During my days in practice, I handle quite a few litigation matters for a well known publishing house. The company owns a string of newspapers and is in the group that also operates a few television stations (that should be sufficient hint). This client has many defamation cases. For those of you who are uninitiated, defamation by definition is words uttered or published which are derogatory to an individual or a person (which includes companies and other persons). Their policy has always been publish first, ask questions later. As such, defamation actions were aplenty. Anyway, this post is not about that. The General Counsel of this client once told me not to encourage my children to take up law as a career and to get them to go into accounting instead. As a lawyer, I was bewildered. I’d definitely like at least one of my children to become a lawyer.

I queried him as to the rationale behind this believe of his. Matter of factly, he said,”lawyers never get to be CEOs. Only accountants do.” That set me thinking. I was quite a junior lawyer then. Naturally it affected the way I think about and see things. It’s true, most companies have accountants as CEOs. But on closer inspection and some research, this fact cannot be said as being true anymore.

Let me provide you with a few examples:

Kenneth I. Chenault (American Express), Richard D. Parsons (Time Warner), Charles O. Prince III (Citigroup), Sumner M. Redstone (Viacom), and Franklin D. Raines (Fannie Mae). According to headhunting firm SpencerStuart, 10.8% of the CEOs of companies in the Standard & Poor’s 500-stock index have law degrees. (Source: http://www.businessweek.com)

Not a bad number and most importantly, not a bad roster of companies. All mammoths in their own right. The Standard & Poor’s 500 stock index consists of large-capital American companies covering about 75 per cent of the American equity market by capitalisation. As the statement above implies, 54 of those large-capital companies at least have somebody who is legally trained as their CEO. Looking at it from that perspective, it appears that the market has moved towards recognising the skills inherently possessed by lawyers. OK. There is recognition. But are lawyers any good as CEOs?

From another source (blogs.wsj.com), Alan Murray propounded 3 schools of thought covering the general perception of the matter. And it’s a rather simple way of looking at it. Mr. Murray, in answering the question said:

Yes: “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. Nardelli and McKinnell (Pfizer’s former CEO) clearly failed to grasp that basic tenet of public-company leadership.”

McKinnell resigned from Pfizer due to falling share prices and a drop in investor confidence. I really cannot argue with Mr. Murray’s statement above. Lawyers generally are trained to be aware of what’s ahead and usually are very much of the “safety first” persuasion. A solicitor holds a duty of care towards clients and are adept at acting in trust of a person or organisation. Well educated and ethical, a lawyer would be loathe to turn his or her back on the trust placed. Mr. Murray’s counter argument to the above is as follows:

No: “Some see this trend (appointing legally-trained personnel as CEOs) 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 [Covington & Burling] lawyer himself and a relentless crusader for legal overhaul. “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.”

With all due respect to Mr. Murray and Mr. Philip Howard, we lawyers are not preoccupied with legal compliance to the extent we don’t get things done. Far from it. Of course there is an obvious tendency for lawyers to dot every i and cross every t, but again we do get things done, you know. Especially when you are in the corporate sector, as I am. Among my favourite line is people will give you something to do today and inevitably they’ll want it to be done yesterday. Which translates into getting assignments done quickly but with a high degree of accuracy and of course, legal compliance. Makes me wonder the credentials of Mr. Philip Howard if I’m being perfectly honest.

And the third argument is:

It Doesn’t Matter: A Home Depot spokesman told Murray there’s a difference “between having a law degree and being a lawyer. Basically, since 1998, Frank’s been out of the lawyer mode.” And Prince believes his legal training is irrelevant. As long as he remains focused on the goal of expanding Citigroup, he says, “whether you are a lawyer or a plumber — it doesn’t make a difference.”

I’m inclined to agree with this one, but with a slight leaning towards the “yes” contention above. Of course it doesn’t matter if your CEO is a lawyer or not. A friend of my mine once told me that a past CEO of a Citibank Malaysia graduated with a degree in Horticulture. Well, I remember Citibank Malaysia being the all-conquering force in the local credit card market then (maybe it still is).

At the risk of this entry becoming a full blown project paper or thesis and tooting my own horn at the same time, I do believe that in the end lawyers possess the ability to view issues from a bird’s eye view and thus being able to make better judgment calls. And when you continually provide advice to your clients, putting your neck on the line becomes second nature. As such accepting and exercising responsibility is not alien to a lawyer. I’ve heard this argument that accountants are very fond of conducting the “kitchen sinking” exercise when brought in to revive an ailing organisation. Would a lawyer do the same? I doubt so. To me the end game is anybody who helms an organisation doesn’t have a choice but to be a big picture guy. A guy who can formulate strategies and carry them through and carry an organisation through good and bad times. In this respect, a lawyer is as good as anybody else.

Interested in my CV anybody?