Executive Lawyers: Gatekeepers or Strategic Officers?

Adair Morse, Wei Wang and Serena Wu

No 22597, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G32 G34 J33 K22 M52 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-hrm, nep-law, nep-lma and nep-sog
Note: CF LE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Adair Morse & Wei Wang & Serena Wu, 2016. "Executive Lawyers: Gatekeepers or Strategic Officers?," The Journal of Law and Economics, vol 59(4), pages 847-888.

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