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By Yin Wilczek
General counsel, in trying to keep their companies out of trouble, must heed one key point: they represent the corporation, not the CEO, Abercrombie & Fitch Co. General Counsel Robert Bostrom said.
The general counsel’s client is not the executive team or the chief executive officer but the corporation, acting through the board of directors, Bostrom said. “Ultimately, hard as that may be sometimes, the hardest conversation a general counsel can ever have is to say to the CEO, ‘I’m not your lawyer, I’m the company’s lawyer.’”
Bostrom said that if Volkswagen AG were a U.S. company, its general counsel—faced with management that refused to fix violations—would have had to resign, go to the board or go to regulators. Had VW in-house counsel taken those steps, attention could have been focused sooner on the company’s emissions problems and made them easier to correct, he said.
“Being a general counsel is a very lonely job, when you get to those moments,” Bostrom said. “They can happen, and when they do, it becomes a very lonely position and a very hard decision to make.”
Watch Bostrom’s interview here.
In one of the biggest scandals in automotive history, VW admitted in September 2015 that it had rigged as many as 11 million diesel vehicles worldwide with so-called defeat devices to cheat on emissions tests. The company agreed in April to pay a $4.3 billion penalty for misleading U.S. regulators and customers over the emissions.
Bostrom, who also previously led the in-house departments at Freddie Mac and National Westminster Bancorp, spoke to Bloomberg BNA on the sidelines of an April 25 University of Delaware/Association of Corporate Counsel conference on the Volkswagen emissions scandal. The conference was sponsored by Bloomberg Law. Abercrombie subsequently confirmed it is talking to other retailers about a possible takeover.
Bostrom said it’s what he doesn’t know that keeps him up at night.
General counsel, to ensure they get the information they need, should create an atmosphere of accessibility and trust in which people are comfortable about approaching them at the start of problems, Bostrom said. This includes making sure staff attorneys understand that they can report anything to the general counsel, and maintaining good relationships with the business units.
In addition, general counsel should ensure their companies maintain robust ethics hotlines, he said. “Your first line of defense is your population of employees,” he said. They’re the “best early warning system that you can possibly have.”
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