naked capitalism

Madi says:

I would say it’s something even more serious than duty of care: she could have breached her duty of loyalty to the corporation. Who does she think are her clients? Her client is the corporation, not its executives. Geesh, definitely conflicts of interest at play. Good ethics would have required that she advise the executives no more than “get yourself independent counsel”

Even if it doesn’t rise to that level, she could be acting in gross negligence or bad faith under the duty of care standard.

Economics of Contempt says:

Based on the facts in the article, I think Kelly would argue that advising the executives to submit written notice that they were prepared to resign if Feinberg cut their compensation was in AIG’s interests — the logic being that (1) the written notices would discourage Feinberg from imposing draconian pay cuts on the next 75 best-paid AIG employees, which (2) is in AIG’s interests because draconian pay cuts would harm AIG’s ability to retain “top talent.” She would argue that she was advising them on what they should do to protect AIG’s interests in its dispute with Feinberg, and that she wasn’t advising them in the context of a dispute between AIG and the executives over severance pay.

It’s a pretty tenuous argument, but I’m sure that’s what it would be.

The problem she’d run into is that while advising the executives to submit written notice that they’re prepared to resign if Feinberg’s decision on compensation for the next 75 employees harms their rights under the executive-severance plan, advising the other executives on whether a hypothetical Feinberg decision harms their rights under the executive-severage plan is a definite no-no. In other words, Kelly could only conceivably advise them to submit the written notices if the fact that Feinberg’s decision harms their rights under the severance plan is a foregone conclusion. But even then she might run afoul of her duties because there might be contractual interpretation arguments that she has a duty to pursue.

I suppose it comes down to what Kelly’s spokesman meant when he said Kelly “advised the other executives of what they needed to do to protect their rights.” If the other executives came to Kelly and the only thing she said was, “I can’t advise you on this; you should retain outside counsel,” then she’s probably fine. But her spokesman makes it sound like she actually advised them on their rights under their severance plans with AIG — if that’s the case, then she’s got problems of her own.

Kelly is really walking a fine line here, that’s for sure.

Ina Pickle says:

When the interests/actions of the control group differ from the interests of the corporation as an entity (assuming that it really exists separate from the control group, but that is a different issue), a corporate counsel needs to start treading very, very carefully.

If it were me, I would have been sorely tempted to get myself outside counsel before I unlocked my door and agreed to see any of the employees. And agreed: all you can say is “I represent the company, and I cannot advise you on this. You must get outside counsel.”