Startup Legal Counsel: Getting to Maybe

  • By John Scharbach
  • Published 3/11/2015

Business people tend to dislike lawyers because lawyers tend to not know how to help business people. Business people are trained to take risks and lawyers are trained to identify and avoid risks. Ideally, these roles are complementary. In practice, however, these roles tend to be frustratingly opposed to one another. The lawyer typically has too much influence on the decision-making process or else not enough influence.

The solution is to find the right balance. In order to do that, the lawyer needs to understand his or her role and how to play to that role effectively.

Getting to Maybe

A company counsel’s first job is to provide counsel.

In law, the most correct answer is usually “maybe.” Every course of action comes with some legal risk or another. Answers are seldom, if ever, clear. But “maybe,” without more, is a not a helpful answer. Business people want actionable information, and “maybe” is not actionable.

One way for lawyers to help translate legal risks into actionable information is to clearly explain and help assess the risks. A frank assessment of risks, based on knowledge and experience, is useful information, because weighing and acting on risks is what business people do best.

More useful is to present different options of varying risk levels, all aimed at accomplishing the same goal. This allows the client to choose between various risk levels. It also helps clients to best understand what they want. Sometimes clients will fixate on a particular course of action because they think that’s the best or only way to accomplish their goal. By helping the client understand the alternatives, lawyers can help clients see what they really want to do.

In other words, a company lawyer’s job is to help the company identify, weigh, and act upon legal risks. Lawyers are intermediaries, of sorts, between the legal framework that exists and the business goals of the company. The lawyer doesn’t dictate strategy; the lawyer helps the client craft a strategy.

Getting to Yes

A company counsel’s second job is to help clients get to “yes.”

The temptation for lawyers is to say “no.” The contract is too one-sided. The compliance risks are too large. The legal answer is too unclear. Lawyers are trained to be risk-averse, and “no” is usually the least risky answer. No is also usually the easiest to implement.

But “no” is almost never the right answer. Unless a lawyer also happens to be an officer or director, it is not his or her place to say “no.” A lawyer’s first job is to help clients understand the “maybe,” and then let clients make their own decision. Sometimes the client needs to make the bad deal. Sometimes the client needs to take the risk. If all the lawyer knows how to say is “no,” then that lawyer isn’t doing his or her job and won’t be involved in the decision-making process for very long, and that is the real danger.

Once the decision is made, the lawyer’s job is to help execute it. Good execution entails minimizing legal risks, reducing costs, and finding creative solutions to problems. These are all things lawyers can and should be good at. In other words, a lawyer’s job is to help a client close the deal the client wants to close.

Getting to No

All of that being said, sometimes a company counsel’s job is to say “no.”

Lawyers should never aid or abet the business people in doing something illegal, foolish, or unethical. Similarly, sometimes the risks associated with an action are so great that the answer needs to be “no” (e.g., disregard for securities law), and sometimes an action is outright illegal (fraud, for instance). Ideally, a lawyer should be able to help the client see why “no” is the right answer. If not, the lawyer might have to simply put his or her foot down. And hopefully that’s the end of it. But if it’s not, circumstances will dictate whether it’s appropriate to escalate the issue (to the Board, for instance) or to find a new client. But the answer in those situations is never go along to get along.

Keep in mind, though, that “no” should be used judiciously. It only carries weight if it’s reserved for the most serious situations. Because “no” is essentially a legal veto, it’s easy to overdo. “No” makes lawyers feel important and powerful, which they are and should be. But it’s easy for that to go to a lawyer’s head, and then that lawyer will start playing decision-maker rather than counselor. Then pretty soon that lawyer will be out of the loop or out of a job.

As a corollary, it’s difficult to overstate the importance of giving answers quickly. This is not to suggest that lawyers need to make on-the-spot snap judgments. But it does mean trying to act quickly and keep the client apprised of how much time you need to give solid advice. If a lawyer is going to be a part of the decision-making process, then he or she shouldn’t be where e-mails go to die. It’s a sad fact that lawyers who slow down the decision-making process get cut out of the decision-making process. And lawyers that get cut out of the decision-making process can’t do their jobs.

Attorneys need to learn how to give effective, actionable advice to business people. This means helping clients accomplish their goals through sound advice and sound execution, and learning when and how to best dissuade clients from unwise courses of action. All of this starts with understanding what business people need and how to give it to them.

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