SAFEGUARDS

Growing BusinessSAFEGUARDS

When's the Right Time to Hire In-House Counsel

QUICK SUMMARY

Owners of growing businesses often approach the question of whether or not to create a position for a full-time attorney as an “either/or” decision: Either we have a general counsel on staff or we outsource everything to a law firm. In fact, companies that have their own general counsel still tend to use outside law firms for specialized work.

That’s why you can’t just assume that it’s time to hire a general counsel when your legal bills are approximately the same as a full-time lawyer’s salary. It’s really more a question of what kind of legal issues you face and your philosophy about adding an attorney to your senior management team.

Defining the Duties of In-House Counsel

  • Emerging businesses tend to encounter complex or specialized legal issues, such as employment contracts, complex relationships with large enterprises, stock issuance, and other securities issues.
  • An in-house attorney’s job may include selecting and managing outside vendors, as well as handling issues internally and providing business counsel.
  • Many general counsels are part of their company’s senior management team, contributing to key business decisions—even when legal issues are not directly involved.
  • Based on their personal expertise, general counsels may want to redo legal work put in place before they arrived—such as your IP protection strategy.
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Pros and Cons of In-House Counsel

  • In-house counsel—like any senior manager with power and influence—adds value when doing the job well, but can become an obstacle if his or her management style is ineffective or does not fit the culture.
  • Your company benefits from an in-house attorney who is tightly aligned with business objectives, but there are risks if he or she is too much of a generalist or a specialist.
  • The attorney can be a strong decision maker…or a bottleneck.
  • Granting stock incentives gives your general counsel greater ownership of outcomes, but can also cause him or her to lose objectivity.
  • There is no question that in-house counsel is subject to potential conflicts of interest. This is normal and simply needs to be managed with transparency and clear ethical guidelines.
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Compensation and Alternative Approaches

  • Hiring an experienced attorney is costly; salaries vary with geography and industry.
  • Alternative compensation approaches include hiring a junior attorney (with fewer responsibilities) or using equity in addition to a below-market salary for a senior attorney.
  • Outsourced general counsel arrangements are also becoming widely available.
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