ARTICLE
12 October 2016

The COO And The GC's Reporting Relationships

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McDermott Will & Emery

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An August 24 article in The Wall Street Journal addresses what is described as a trend with leading corporations to eliminate the chief operating officer position, in order to "flatten" management structures.
United States Corporate/Commercial Law
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An August 24 article in The Wall Street Journal addresses what is described as a trend with leading corporations to eliminate the chief operating officer position, in order to "flatten" management structures. To the extent the chief financial officer assumes the COO duties--as is suggested by The Journal--it could complicate the general counsel's reporting relationships.

In many large organizations, including organizationally complex health systems, the general counsel directly reports to the COO. This reporting relationship is consistent with corporate responsibility principles, when the COO carries out the day-to-day duties of the CEO and the general counsel has futility bypass rights to the CEO and to the board, respectively. However, such principles generally discourage a "general counsel-to-CFO reporting relationship," for many reasons (e.g., their respective roles in financial reporting and disclosure; the CFO's role in transaction development and budget development, etc.). 

Thus, the CFO becoming the general counsel's "direct report" may create a corporate responsibility dilemma. Indeed, enforcement agencies are increasingly evaluating reporting relationships for indicia of organizational commitment to legal compliance. Thus, the potential conflicts and tensions arising from such a shift should be closely considered by senior management, and protections built into the new relationship.

The COO And The GC's Reporting Relationships

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