As recent events at Tesla suggest, the departure of a company’s general counsel should almost always raise the yellow flag in the boardroom, no matter the circumstances
. Director alertness should be enhanced, and a diligent inquiry into the circumstances should be conducted. For as it was with Tesla, so it is with other companies. The general counsel is no ordinary officer, and her departure is no ordinary event.
In Tesla’s case, the announcement came on the heels of the retirement of the company’s CFO, and follows over two years of substantial turnover in the company’s executive ranks. Furthermore, media reports suggested a connection between the general counsel’s departure and concerns that a tweet from Tesla’s CEO may have violated the terms of the recent settlement between the CEO, Tesla and the SEC.
Furthermore, she’s responsible for advising both the executive leadership team and the board on the company’s compliance with law, and on its satisfaction of ethical responsibilities. She interacts with state and federal regulators and the courts on behalf of the company and is a valued business partner to management.
The obligation also extends to being notified of, and becoming fully advised of the reasons for, the termination or other form of departure of the general counsel. The board must understand why the general counsel has left—and may need to hear that directly from her.
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