Executive Lawyers: Gatekeepers or Strategic Officers?

54 Pages Posted: 7 Sep 2016

See all articles by Adair Morse

Adair Morse

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Wei Wang

Smith School of Business

Serena Wu

Queen's University

Multiple version iconThere are 3 versions of this paper

Date Written: September 2016

Abstract

Lawyers now serve as executives in 44% of corporations. Although endowed with gatekeeping responsibilities, executive lawyers face increasing pressure to use time on strategic efforts. In a lawyer fixed effects model, we quantify that lawyers are half as important as CEOs in explaining variances in compliance, monitoring, and business development. In a difference-in-differences model, we find that hiring lawyers into executive positions associates with 50% reduction in compliance breaches and 32% reduction in monitoring breaches. We then ask whether firms’ optimal contracting of lawyers into strategic activities implies less lawyer gatekeeping effort. Using a design comparing executive lawyers hired from law firms to lawyers poached from corporations, we find that lawyers hired with high compensation delta (indicative of the importance of strategic goals in compensation contracts) do less monitoring, preventing 25% fewer breaches than are typically mitigated by having an executive gatekeeper. Reassuringly, lawyers do not compromise compliance.

Suggested Citation

Morse, Adair and Wang, Wei and Wu, Serena, Executive Lawyers: Gatekeepers or Strategic Officers? (September 2016). NBER Working Paper No. w22597. Available at SSRN: https://ssrn.com/abstract=2835855

Adair Morse (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Wei Wang

Smith School of Business ( email )

Queen's University-Smith School of Business
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Serena Wu

Queen's University ( email )

Kingston, Ontario K7L 3N6
Canada

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