We talk a lot about diversity, and how important it is for companies. In addition to mirroring their customer base, companies want to make sure they have diversity of thought at the leadership level. Companies like Uber (and indirectly perhaps the entire car-share industry) have suffered because they were trapped in a singular “bro leadership” mindset that led to some disastrous results. If everyone thinks the same way and no one pushes back, the CEO echo chamber becomes a very dangerous place.
There was a study published in the Harvard Business Review that examined the performance of companies run by CEOs with a JD v. CEOs with an MBA or another degree. This important work, led by M. Todd Henderson of University of Chicago Law school, revealed some telling differences. Among other findings, companies led by JD-CEOs had far less litigation than other companies. Companies in highly regulated industries, such as pharmaceuticals, fared far better with a law-degreed leader than others.
Henderson’s study and article posits some reasons, but here are mine.
Risk analysis, when conducted by a trained attorney, is the epitome of diverse thought.
A good attorney examines the landscape and determines how many different ways a statement or action could be experienced and perceived. She also advises how to mitigate any unfavorable perceptions, actions or reactions. In the hands of a perceptive advisor, this analytical framework, honed over years of practice, is an invaluable part of a growth-minded company’s leadership.
I choose my clients in part based on their management and leadership teams, including their diversity. In my experience, diverse companies simply do better, and are better clients. I am arguing for ensuring that all companies have a process to evaluate whether they are trapped in groupthink, or are truly getting advice that values diverse lines of thinking, and takes that thinking into account.
According to Henderson’s work, companies led by lawyer-CEOs have a more sophisticated view of risk, suffer far less litigation, and are perceived as performing better when it comes to compliance. Does this mean that every company should look for a lawyer as CEO — not at all. However, fully empowering your general counsel and including an attorney or two on your board of directors will help shift mindset, which, according to Henderson’s work, directly impacts the bottom line.