Schering-Plough is no stranger to compliance problems. Huges fines were paid to resolve manufacturing and marketing violations in recent years. Beyond the ceo, who must avoid - or clean up - such a mess? The general counsel, of course. The Metropolitan Corporate Counsel spoke with Tom Sabatino, the drugmaker’s chief lawyer, about his views of compliance issues. This is an excerpt. One caveat: this is either very tightly edited or, more likely, reflects carefully crafted hand-written responses. We are talking about lawyers, after all.

MCC: How would you characterize the role of the general counsel?

Sabatino: The general counsel often sits at the fulcrum of decision making in a corporation, especially where he has a deep understanding of the business dynamics and challenges that drive the corporation. He is frequently in the best position to see both the opportunities and risks of a given business decision and he can give the CEO, other members of senior management, and the board a balanced view and advice. The general counsel is also frequently seen as a moral compass for the organization - helping to ensure that the organization “does the right thing,” not just the legally acceptable thing. This behavior reinforces a corporation’s commitment to good corporate governance and compliance and amplifies the right “tone at the top.”

MCC: Should the general counsel regularly report to the CEO and the independent directors on matters relating to compliance and governance?

Sabatino: Absolutely. I have both formal and informal ways of communicating with the CEO on governance and compliance related activity. At Schering-Plough, we also have a chief compliance officer who reports directly to the CEO. She and I work hand in glove on all important compliance-related activity and we both have easy and ongoing access to the CEO and other members of senior management. On governance matters the corporate secretary is also the Chief Governance Officer; she reports to me, and she has unfettered access to the CEO and me and the head of our Nominating and Corporate Governance committee. But it is also a matter of attitude on the part of the CEO. He or she must be interested and engaged in dealing with these matters, seeking out the information and not merely waiting for it to come to him. We are lucky at Schering-Plough as our CEO is quite engaged in these issues.

MCC: Should in-house lawyers be trained to recognize problems that may need to be referred to outside specialists?

Sabatino: Depending on the size and complexity of the organization, legal specialists need to be available. In highly regulated industries, this becomes essential. For example, we have people who are experts in areas like FDA, regulatory, pricing and reimbursement but they are not merely high level specialists who are called on when needed. They are highly valued members of the business teams with whom they work. In addition, it is very important to have good cross-functional training so that those who work directly with certain management groups can spot issues and triage them to appropriate experts either in the company or outside.

MCC: Can a partially centralized and partially decentralized structure be effective in uncovering and addressing compliance issues?

Sabatino: The centralized/decentralized model under which some areas are centralized, with direct report to the general counsel, and other areas are decentralized with direct business reporting and a dotted line to the general counsel, has limitations. There is a different model which we use at Schering-Plough. Under this model all of the lawyers report up through the law department but many of the lawyers operate as members of management teams and frequently their offices are located with those of the business partners. We do this in a number of countries around the world. I think this continues the accountability and connectivity to the law department with the intimacy to the business that is essential to being a good business partner. This maximizes the chances of addressing compliance and other legal issues early because you can recognize them as they are developing and the lawyer can leverage the rest of the law department to help find solutions to these issues.

You can read the full Q&A here.