Who is my client right now?

Disclaimer: I have no inside knowledge of what actually happened at Disney.

Imagine you are a General Counsel and one of your directors, who happens to be the former long-time Chairman and CEO, Bob Iger, starts a months-long lobbying campaign for the Board to reinstate him as CEO in place of your boss, the current CEO. Imagine further that Board members do not see eye to eye on whether the CEO should be Mr. Chapek, Mr. Iger or someone else, and several think it’s the wrong issue to be focused on right now. And, finally, imagine the Board’s current chair has been vocal about her support of Mr. Iger, and has become even more vocal following a poorly handled earnings call.

As General Counsel you now find yourself in a situation where emotions are running high, tempers are running hot and time is running short. And all of this is taking place around a question that implicates a Board’s most important responsibility — deciding who the CEO will be. The Board therefore needs to undertake a deliberate and defensible process in its consideration of this question.

As all of this accelerates, one of the things you have to be asking yourself as General Counsel is: “Who is my client right now?”

99% of the time your functional client is your boss, the current CEO. He’s the one charged with running the company and in need of your advice on behalf of the company to execute its strategy. But now he’s caught up in a Board process that will decide whether he continues as CEO. And, you’re probably getting calls for advice from Board members, including the Chair, who are working to reinstate Mr. Iger.

In cases where your CEO has an interest in the outcome of a Board decision, your functional client becomes the Board Chair. But in this case, your Board Chair has taken a strong position on the question of who should be the CEO.  At the same time, the Board Chair is the person responsible for leading the Board’s decision making process. Will non-aligned Board members (or future plaintiffs potentially) respect a deliberative process run by a staunch advocate of one candidate ? 

So who is the GC’s client at this point? It’s the corporation, of course. That’s Corporations 101 from law school. But how do you serve a client when the human beings who could serve as your functional client either have a direct interest in the outcome of the Board’s CEO decision or may be seen as conflicted in the minds of some directors? How are you going to make everyone involved believe the process is appropriate and fair?

As General Counsel, you are in a perilous, yet critical position. In the best case, you will have a track record with the Board as a straight shooter, an honest broker and a capable diplomat. To be successful in this situation, the GC must be seen by everyone as a neutral advisor dispensing impartial advice to everyone involved. In this case, Disney’s GC had just joined the company months earlier and was hired by Mr. Chapek.  

Although it’s not ideal, your functional client is the Board Chair. While she’s not technically conflicted, she is somewhat compromised in the eyes of some directors. Your job is to advise her on the appropriate governance process for the Board’s deliberation around this controversial question. How do we define a defensible process? How do we make sure everyone’s voice is heard? How do we dispel disinformation? How do we make sure all directors, especially new directors, have all the information they need to evaluate whether it’s appropriate to stick with Mr. Chapek, select Mr. Iger or someone else?

No matter what you do, someone, maybe everyone, is going to be unhappy with how the whole thing plays out. This includes your C-Suite colleagues. You are going to get calls from concerned or angry directors on all sides of the issue. You may be accused of taking sides or putting your thumb on the scale. You may worry that no matter what happens, your career at the company will be a casualty of the process. Unfortunately, this is a job hazard GCs inherit when they accept the role. Allowing concern about the personal effect of any situation to influence your advice is almost certain to affect your continued employment.

Once the decision on the CEO is ultimately made, it doesn’t get easier. The GC now has to work through an orderly transition of the deposed CEO and welcome a new CEO, who may be unhappy about the GC’s role in the Board’s decision making process. The process may have created factions on the Board, and within management, that fractured relationships. Publicly, the Board is proclaiming unity, but behind the scenes you may no longer have a unified Board. How is the GC and the new CEO going to manage and mend these relationships? Will unsettled directors eventually choose to resign?

This is why I say the situation sounds like a nightmare for Disney’s General Counsel. Maybe it wasn’t in real life, but it had all the ingredients to be one on many levels.