In-house: new consigliere

Much has been written about the changes in business, politics and the economy in the years since the global financial crisis. The changes in senior executive (C-suite) roles within organisations have also been well documented, but it is perhaps fair to say that the impact on the role of the chief legal officer (the general counsel) – and the response of those who are privileged to hold it – has been little short of a revolution.

Shape of the role

Two things are clear: first, that there is no single template for the role of a general counsel; and second, that the responsibilities of the role in most organisations have changed hugely in the last decade. The shape and development of the role in each organisation will have been influenced by the pressures on the organisation, the holder of the role and the views of the organisation’s leadership. However, it is fair to say that in many organisations the role has encompassed broader responsibilities – from compliance and external relations, to strategy, security and government affairs, with many others in between.

The breadth of the role has increased significantly, to the extent that the boundaries of the role are often unclear, with the GC coming to own many of what are termed the ‘unknown unknowns’ of the organisation. Further, there has been significant movement in the spectrum, away from the role of a specialist or technician – to the extent it existed – towards that of a ‘consigliere’, trusted adviser and counsellor.

Of most note, though, is the fact that the GC is often the key driver in defining the shape of the role: those who are prepared to accept new challenges and responsibilities have led the development of the role significantly. Those who continue to be willing to do so now have the opportunity to develop the role even further.

Context is all

Organisations do not exist in a vacuum. They are a product of: the markets in which they operate; the competitive environment; a range of external influences – from their customers and regulators to the political landscape; the growing impact of human rights; and the many issues which influence their licence to operate and to carry out their activities. Each of those factors has affected the role of the GC.

Markets are regulated and controlled, with GCs often at the forefront of market investigations and merger enquiries. Political factors influence the way in which business is done, and for those organisations whose primary customer base is the public sector or whose activities are influenced by regulation, the GC may have to set the path between business requirements and new regulation.

The risks of doing business are well-known to be something with which the GC is concerned – ensuring that the organisation understands the risk it is assuming in its operations, whether by contract, through its activities, or through the actions of others.

More complex still, though, is the organisation’s place in society – how it behaves, reacts and is perceived – whether through what may be called corporate responsibility, sustainability or external relations. That can require the engagement of the GC to ensure that liabilities and responsibilities are understood and properly engaged with.

Consequences of regulation

The past decade has seen a shift towards much greater regulation of organisations generally, and a trend to the extra-territoriality of that regulation. Put simply, an organisation can no longer assume it is bound only by the rules of its home jurisdiction, and the politics of regulation have increasing reign.

Fines and penalties are much more significant than they have been previously. In the US and the UK, there are now very significant financial penalties for many financial sector breaches which could threaten the profitability, if not the survival, of the organisation. The recent changes in sentencing practice in both environmental, and health and safety offences in the UK can see penalties equivalent to the annual profit of an organisation.

GCs are involved not just in dealing with the consequences of these changes, but must also be fundamentally involved in the governance, procedural, training and control activities which organisations have introduced to manage and mitigate the risks. The general counsel must lead the response to regulatory changes and the challenges those changes bring.

Governance, ethics and compliance

The behaviour of organisations and their leaders has been open to significant criticism; the spectre of banking concerns still vividly colours the regulatory framework. There have been many changes in the governance of organisations, with pressures from the financial services sector translating into controls on organisations as a whole.

The regulatory regimes of the Financial Conduct Authority, the Prudential Regulation Authority, the UK Corporate Governance Code, the Modern Slavery Act 2015 – and a number of other initiatives around reporting – have seen further tightening in governance regimes. At the time of writing, some eight of the FTSE 100 are under investigation by the Serious Fraud Office.

In response, GCs often find themselves with formal responsibilities; as company secretary or with line responsibility for a compliance team, for example. More informally, though, they may be expected to work in a role that could be described as the  ‘conscience’ of the company: influencing, and ultimately ensuring, behaviours which result in the continued health and existence of the organisation. In doing so, they must use the skills of a psychologist to navigate the conflicting demands of financial pressures, the personal priorities of the individuals with whom they interact and their own professional duties, while continuing to command the respect which enables the role to be fulfilled.

It is also necessary to bear in mind that much regulation in recent years has put new, and personal, liabilities onto directors and managers, whether in the fields of governance, reporting, compliance or ethics. Many of these responsibilities will not be ones which directors and managers have grown up with. It will often be the job of the GC to ensure that they know and understand the framework of their responsibilities and the implications for non-compliance.

One must also consider that GCs themselves have responsibilities both in law and in their professional capacity, and there are increasing examples of general counsel under investigation. While this is most common in the US, there are also examples in the UK and that can only be expected to increase.

Shaping and sourcing legal services

The legal market has changed, almost beyond recognition, in the last decade. That change has presented real opportunity for GCs – to structure legal services to be individually tailored to the organisation, to meet its current and future needs, and to integrate those services closely with the culture and operation of the organisation – if they are prepared to work to take advantage of that change.

Self-evidently, law firms have changed structurally, with significant consolidation in the market and even a number of firms entering administration. At the same time, new entrants to the market and new offerings from existing providers are broadening the options for the GC. Examples of new alternatives include legal outsourcing offerings which allow work to be carried out more effectively and efficiently, technologies that will automate a number of legal processes and the growth of contract lawyer offerings.

At the same time the increased availability of knowledge management products and technologies, the willingness of legal providers to collaborate and work with organisations, and the ability to link knowledge management with new forms of output all allow general counsel to reshape their resourcing of legal work.

Equally, opportunities have arisen for general counsel to develop and commercialise the offerings of their own teams, and to drive the change both personally and professionally. Within my own organisation, for example, our Advice Services business successfully offers legal services to other corporations. There are also examples of other legal teams, particularly in the local government sphere, commercialising their offering to the benefit of both their organisation and its customers.

People, relationships and responsibilities

The defining quality of a GC is not, perhaps, simply their ability to identify, mitigate and resolve legal issues, but their ability to do so in the context of the complex web of the relationships which influence them.

They must have the skills of adviser, expert and trusted counsellor for the chair, chief executive and other members of the board. At the same time, they must be able to manage peer relationships with colleagues, directors and teams within the organisation. As well as managing the organisation’s legal resourcing, they must be able to liaise with a range of other professional advisers and providers – whether bankers, brokers, financial, PR, or service providers – while at the same time being able to maintain a degree of professional independence allowing them to assess, and if necessary challenge, the advice received.

They will also have an influence (and possibly a much greater influence than is widely understood) on the commercial success of the organisation. For example, the last decade has seen a much greater transfer of risk from customers to suppliers in many industries. The assessment of these risks and the way they are assumed and dealt with contractually may mean the difference between success and failure. The old jokes about the ‘business prevention department’ may be outdated, but it is critical that GCs and their teams are central to the understanding and mitigation of that business risk.

Last, but most certainly not least, general counsel must manage a relationship with their own teams. It has been said that the most important role of the general counsel is to populate their teams: recruiting, developing, managing and retaining the right people; and setting the tone and culture of the team and so, to a degree, the culture of the organisation. The general counsel can have a significant personal impact on ‘how things are done around here’.

Strategy and its execution

Changes in the global economy in the last decade have led to organisations undertaking new and different activities, often in new markets and locations. There has been growth in merger and acquisition work, divestment and disposal, initial public offerings, demergers and other corporate actions.

The role of the GC has changed in many organisations from that of someone who may have been involved in the implementation of such strategic change, to someone involved intimately in the setting of that strategy, as well as its framing, structuring and execution. There is nothing to be gained by having (and worse still, going public with) a strategy which cannot be achieved. The early, informed, influence of the GC can help ensure that structural and regulatory issues are dealt with in the initial stages, that issues are identified and mitigated in due diligence, and that the law of unintended consequences is avoided.

The GCs who best display these skills, and who continue to embrace the changes in the role (and put in place systems which allow their organisations to mitigate and deal with those changes) now have a great opportunity to develop their role and to deliver real value to their organisations.

• This is the first in a series of thought leadership articles on the in-house lawyer sector. It is an edited version of a chapter in The Future of the In-House Lawyer: The General Counsel Revolution, which is published this week by The Law Society (£79).