Law Students

Lawyer-CEOs

By Scott Felsenthal et al.

What do the public companies of Marsh & McLennan (MMC), American Express (AXP), Time Warner (TWX), Citigroup (C), Viacom (VIA), and Fannie Mae (FNM) have in common? The current CEOs of these companies are all lawyers (with the exception of Citigroup, whose former lawyer-CEO Charles O. Prince III just recently resigned). These are just a small sampling of the public companies with lawyer-CEOs. The question then becomes, why?

An article in BusinessWeek titled "A Compelling Case For Lawyer-CEOs" dives deep into this question and reaches an honest and simple conclusion- in such litigious times, lawyer-CEOs just make sense. The article highlights the CEO of Marsh & McLennan, Michael G. Cherkasky, a former district attorney who had no prior education or work experience in finance or the financial markets. The article points out that Cherkasky has "one credential that outweighs all of his shortcomings: a close relationship with Eliot Spitzer-- who used to work for him in the Manhattan district attorney's office." Amazingly, the instant that Cherkasky took the helm at Marsh & McLennan, the potential threat of a major legal setback against the company suddenly disappeared.

One of the major setbacks for attorneys is their lack of financial expertise. Many lawyer-CEOs take graduate finance courses to becoming familiar with the financial aspects of business. The biggest problem facing lawyer-CEOS, at least through BusinessWeek's perspective, is that lawyers have a hard time leading because the practice of law is often an individual practice. Sure, some lawyers are at firms with 200+ attorneys, but typically you are running your own little "law firm" within the firm, and that still is vastly different from being at the helm of a public company with anywhere from 2,000 to 350,000 to 500,000 employees.

The article does talk about the advantages a lawyer has in being a CEO. For example, the article points out how lawyers are trained to spot "hot-button" issues and how they are trained to speak with composure and under pressure. Perhaps most importantly, when a company is under fire for some reason or another, who better than a lawyer to argue the other side to mitigate the regulatory pressure.

Hey Warren Buffett-- I will graduating law school in 2009. Don't you need a successor at Berkshire Hathaway?

Full post as published by The Legal Scoop on January 17, 2008 (boomark / email).