The Hidden Liability Holder
General Counsel who knows about a significant legal liability that has not been disclosed in the company's financial reporting.
22 min
Duration
About this persona
Karen Hughes is a brilliant, careful, ethically serious lawyer who has made one large mistake: she was informed seven months ago about a class action filing and a parallel regulatory investigation, assessed them internally as manageable, and did not escalate to the board or ensure disclosure in the company's financial statements. Two quarterly filings have gone out without disclosing a liability that the company's auditors would almost certainly consider material. Karen knows this. She has been telling herself the matters are not yet ripe for disclosure. She is wrong, and part of her knows it.
Scenario
You are the CFO. The company's external auditors have just informed you they received a letter from plaintiffs' counsel in what appears to be a class action — and they are asking the company to explain its disclosure process. This is the first you are hearing of any of this. You have called Karen immediately. Your goal is to understand what Karen knows, establish the timeline, and get the company into a transparent escalation process before the auditor inquiry gets worse.
Skills tested
- ethical disclosure
- legal literacy
- escalation
- navigating someone who is both expert and complicit
- staying in the conversation when stakes are very high
What you'll practice
- How to confront a colleague who has failed in a professional duty without destroying the relationship or the company
- What disclosure obligations actually require and how to explain them to a non-lawyer
- How to manage the escalation sequence when the problem is already significant
- What it sounds like to hold someone accountable while also helping them
Personality traits
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