REPORTING: general counsel should go to chief executive
Parmalat's former general counsel was powerless to prevent widespread fraud because of a lack of proper reporting lines, the lead counsel to the company's administrator said last week.
Collecchio's Bruno Cova told delegates at the International Bar Association's international corporate counsel conference in Rome that the former general counsel of the troubled Italian company had no central control over in-house counsel in the company's many separate operations.
Mr Cova said: 'There was a legal department in Parmalat with perfectly good lawyers - but they were not given the opportunity to understand what was going on.'
He added: 'Before a general counsel accepts a job in any company, they must make sure that they report directly to the chief executive or the chairman.
All other lawyers within the company should report to the general counsel, so that the general counsel can understand what is going on.
'Parmalat did not have those reporting lines.
Lawyers only reported to the operation they were working for, and so the general counsel was not put in the situation where he could help.'
Mr Cova said the former general counsel was not given any involvement in accounting issues.
He added that it was essential for general counsel to be involved in key meetings and have control of external lawyers.
He said: 'In-house lawyers are best equipped to make the choice of external counsel.
If they do not [make that choice], at the minimum it implies that management does not trust your judgement.
And outside counsel may know things which the in-house lawyer is not aware of.'
Bill Lytton, senior vice-president and general counsel of US conglomerate Tyco, said: 'It is a warning sign if there is a meeting going on and as a lawyer you are not allowed to go.
There should be no meeting which a general counsel can't go to - especially now, when general counsel are recognised as having more of a central part in management decisions than before.'