It should not matter whether the CFO reports into the GC (unlikely in reality) or the GC reports into the CFO (not unusual). But it does. It matters a lot to lawyers who often wrestle about whether or not it’s a good idea, usually fears of independence being compromised.
A Linked In thread on a group for in house lawyers (closed group) raised this question and the overwhelming consensus was to avoid working in that company with that arrangement. A lawyer must ensure that his or her independence is uncompromised. Principle 3 of the SRA Handbook says as much.
The tricky situation for lawyers is that the principle overrides any reporting lines and direct access to the decision makers. For in house lawyers with management responsibility additional regulations apply including a requirement to ensure effective governance and reporting lines. This applies to lawyers no matter who they may report to.
It’s not necessarily the reporting line that this the problem. It’s courage. There’s little difference between telling some home truths to your CEO directly and going over your CFO’s head to the top if your integrity feels that’s what’s required. You’ll still be ruffling some feathers! Just one path, may ruffle more.
For lawyers, telling truth to power is sometimes required and if stepping on toes troubles you because of a reporting line issue, perhaps you need to consider whether or not you are hampering your own independence!
There are ways to manage this in a politically charged business environment. You could make it clear upon accepting a role reporting to the CFO that your professional obligations may require you sometimes to speak directly to the CEO. You can also build the necessary alliances and trust within the business to see that you have voice at the top table (ie prove yourself).
The CFO and GC should be aligned on business objectives. Both will want to help the business that they work for grow in a sustainable way, managing the risks along the way. But, personally, I’m not a fan of a lawyer reporting to the CFO largely for the reasons set out by Tom Kilroy on his blog. I do believe that in smaller companies it has a place, if only that the CEO/founders are often too pre-occupied with the business idea and leave the management to the CFO in a dual COO role.
So long as you’re comfortable speaking truth to power, the reporting lines shouldn’t matter all that much.