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CFOs: Distinguish Yourself in the Legal Arena.


CFOs often must determine “what to do” in the legal arena.  Whether supervising a general counsel or directly in contact with outside counsel, the CFO is responsible.  The CFO—who is usually not an attorney—must both understand the legal issues, at least to a certain degree, and be judicious in determining the correct path forward.  This article provides guidance, from an attorney’s perspective, on how executives can work with counsel to make the “right choice.”

Managing Outside Counsel: CFO vs. CEO.  Corporate structures delegate authority and responsibility.  Outside counsel has a place within the structure, reporting on most litigation matters and transactions to the CFO, or to an intermediate general counsel.  Outside counsel will report to the CEO or Board only for major litigation or strategic transactions, and then only for the most important decisions.  In almost all situations, outside counsel will be working with the CFO or the CFO’s team for information gathering and day-to-day decisions.

Utilize Your Attorney’s Broad Experience.  Most “C-Suite Executives” prefer that their attorneys only provide legal advice and direction, and loathe when they veer too much into the business-related aspects.  Similarly, many attorneys prefer to be ‘just’ attorneys.  Attorneys rarely have the necessary skills and training to decide, plan or budget for business decisions.  However, business attorneys have both their own experiences with a variety of clients and the rich history of business disputes encapsulated in legal decisions and practice guides.  A lawyer’s prodding can often help management evaluate whether: the right decision has been made, the appropriate personnel have been found to help implement that decision and the goals are being met.

Talk to a Trial Lawyer, Yes a Trial Lawyer, Before a Merger or Acquisition.  When evaluating a merger or acquisition, a CFO is always going to ask for tax and corporate advice.  For example, in some instances, a merger, as opposed to a direct sale, is advisable for tax-avoidance purposes.  However, when contemplating a merger as opposed to an asset sale, there are additional questions to ask.  A merger means that the parties—usually strong-minded successful people who may be competitors and have often never worked together—are now business partners.  This creates a risk of friction, even litigation, as unwritten understandings are recalled according to each side’s wishful memory.  Trial counsel should be asked, “If this contemplated arrangement goes to court, can my business expectations be enforced?”

Not Just an Insurance Policy.  In transactional work, executives often view their counsel as an “insurance policy.”  In this model, counsel’s role is simply to avoid obvious mistakes, at the least cost.  Often attorneys encourage this paradigm by expressly marketing themselves as an “insurance policy.”  However, a good transactional attorney can add financial value by paying strict attention to terms and conditions.  For example, properly editing language in a warranty clause may change the provision entirely, shifting significant financial responsibility.  The CFO should demand that the attorney improve the bottom line with strong negotiation and careful drafting.

Litigation of Accounts Receivable.  A company which does not promptly cause the collection of accounts receivable is operating an unlicensed bank.  The late-paying customer hurts not just the bottom line, but company morale.  Any customer habitually over 90-days late is probably insolvent or on the path to financial ruin.  Find energetic and diligent collection counsel who can collect unpaid accounts.  Efficiency is also important: the right letter can be more effective than a lawsuit and a fruitless pursuit is throwing good money after bad.

It’s Your Decision.  CFOs have significant responsibility for legal outcomes and should make those decisions in the way that works best for them.  Most of the time, executives should ask counsel to provide summaries of pertinent information.  A follow up phone call lasting around 30 minutes on a once a month basis is often sufficient.  For some executives, the most efficient way to make the most important legal decisions is an in-person meeting with counsel in the conference room, with the pertinent information noted on the white board.

Lead Your Attorney.  The CFO can impact attorney behavior in litigation and transactional work.  There is something about certain corporate leaders that inspires both employees and counsel.  Confidence, loyalty, similar culture, the ability to communicate with a few words, proper incentives, the right kind of encouragement, mutual respect and other intangibles, all these contribute to the risk-taking that achieves results that far exceed expectations.

Opportunity for Distinction.  Legal outcomes change financial results. With the right approach to legal matters, the CFO can impact the organization. Decision-making in the legal arena is an opportunity for distinction.

Nathan Wirtschafter, Esq. is a California business trial attorney.  His law practice encompasses a broad range of business matters, and he represents clients in state and federal courts, arbitration and mediation.  He can be reached at (818) 660-2518 and

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CFOs work with our law firm to manage litigation, improve standard agreements and discuss new business opportunities. 


We have years of experience helping business clients recover money owed to them.


The firm provides advice on how to respond to changes in the law. 

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