The complex and volatile business world needs an effective partnership of a firm’s general counsel and chief financial officer, an expert argues.
Writing for the Harvard Business Review, Benjamin W. Heineman Jr., senior fellow at Harvard’s schools of law and government, discusses how the chief financial officer-general counsel (CFO- GC) works in four key areas.
The former GE general counsel said that the CEO is often scrutinized for their role in promoting high performance, high integrity and sound risk management. He said that the GC-CFO alliance should be observed and improved just as much.
In his think piece, Heineman argues that directors and stakeholders now see the importance and stature of general counsels as comparable to the CFO. He suggests that the CFO-GC relationship should be more like a peer relationship in order to effectively work.
Heineman said that the finance and the legal functions “are truly the nervous system of the corporation.”
Furthermore, he said that the cooperation of the legal and financial departments of companies is needed more than ever because firms need to tackle not only financial and commercial issues but also legislation, regulation, litigation, enforcement, investigations, geopolitical risk, demands for ethical actions, and public criticism.
This coupled with increasing shareholder demands is why the CFO and the GC should deliver analysis formed by both to other business leaders, he said.
One key area Heineman identified is performance.
“Financial, legal, ethical and risk perspectives obviously need to be integrated when the corporation is making decisions about new deals, about new types of customers, new geographic markets, new technologies and new products,” Heineman said.
Another key partnership area the expert identified is compliance.
“Although the CEO and division heads should, in my view, be the ultimate leaders of the corporate compliance program, the CFO and GC jointly share responsibility for actually designing and implementing the systems and processes that ensure adherence to formal legal and financial rules,” Heineman wrote.
As for ethics, another area identified by Heineman, he says that the CFO and GC can systematically craft programs based on key ethical positions on select issues that go beyond what formal rules require.
This, the Harvard distinguished senior fellow said, is one factor that makes a company exemplary among its peers.
Heineman also noted that in the area of risk, the CFO and GC should work together identifying priorities.
“The CFO and GC are key in developing together, with business leaders and other staff officers, safety processes, management practices, and a safety culture to handle both economic and non-economic risks beyond legal and ethical threats,” he said.
Heineman advocates for both CFOs and GCs to support each other as company “statepersons” who ask each other whether decisions conform not only with legal and financial rules but also with corporate missions of high performance with high integrity and sound risk management.