Pros and Cons of In-House Counsel
As with any senior position, the individual characteristics of the lawyer you hire are probably more important than the intrinsic strengths or weaknesses of the role itself.
For example, let’s start with decision-making. One of the advantages of in-house counsel is that you add a legal dimension to key decisions, which should improve the company’s risk management profile. But what if the general counsel proves to be a slow decision-maker, or, to put it less politely, a bottleneck? That’s a serious problem. The point is, not all attorneys are decisive. If you’ve decided you need in-house counsel, then make sure you hire one with a proven track record of timely decisions.
Another typical trade-off relates to the legal background and industry experience of the business attorney. For example, if you own a growing technology company, it may seem obvious to hire an IP attorney with experience in your segment of the industry. Such a person would be tightly aligned with your business and understand the issues from the ground up. However, on the downside, he or she might not have the management skills to deal with outside law firms needed to help with fundraising and securities issues. Or the general business knowledge to negotiate successfully with clients in other industries.
Perhaps most important are the issues that arise when the in-house counsel also has an ownership stake in the company. Granting shares in the company is a normal, accepted practice to provide an extra incentive for employees in key positions to do their best work. However, your advocate could lose objectivity—in the form of lower standards for due diligence—when he or she stands to gain financially from a specific deal. In fairness, this would be true of anyone, in any role, with a stake in the company and responsibility for the decision. But it’s particularly true of attorneys who are involved in writing and negotiating the specific terms of deals that may impact them personally.