Future-proofing against legal challenges

As businesses keep expanding internationally, the potential legal risks they face multiply. Class action suits in Germany, national security subpoenas in the US, intellectual property infringements in China – these days, legal trouble can pop up anywhere.

STORY BY BENNETT VOYLES

To stay in compliance and out of court, companies have greatly expanded their legal teams over the past 15 years. ABN AMRO, the Dutch banking giant, now has around 240 in-house lawyers, 72 hired in the past year alone, notes says Pursey Heugens, professor of organisation theory, development and change in the department of strategic management and entrepreneurship at RSM, and a faculty member of its new General Counsel Executive Programme.

Once just the chief in-house lawyer, a firm’s general counsel (GC) now wears several hats, including strategic advisor, legal risk manager, team leader and legal services procurement officer. American, British and increasing numbers of European companies are even making GCs an active part of the executive team, says Petra van Hilst, a former GC and cofounder of the General Counsel Netherlands (GCN) professional network.

Rising respect

‘The perception of in-house counsel in Europe was often, “Oh, this is the person who does the contracts”,’ says Sébastien Vitali, senior corporate counsel and legal director for Wyeth Nutrition, a unit of Nestlé based in the USA.

But Vitali argues that was shortsighted. ‘We’re not just compliance guys, we’re not policemen, just checking that people comply with the law and telling them what is right and what is wrong. That is part of our role – we do that – but it’s not the core of our role. The core of our role is to provide strategic legal guidance to the company and you can only do this as a business lawyer if you’re sitting with the business.’

Smarter companies have begun to realise that it pays to include lawyers in every major decision. Many legal departments are no longer reactive operating business units but strategic and transparent thinking teams that operate as business partners, both in operations and in changing environments, says Van Hilst. At Nestlé, for instance, lawyers are now more often embedded within the executive team of each business unit headquarters instead of all centralised in Veveye, according to Vitali.

Yet recognition of the role’s strategic importance still lags at many companies, even in the US, which has had a longer tradition of GCs in the executive suite. A 2013 survey by the US-based Association for General Counsel found that corporate directors tend to view the value of their GC’s advice as much less strategic than the GCs themselves do – 27 per cent to 62 per cent.

A challenging role

The GC role differs from that of an in-house lawyer in several respects. Perhaps the most important is that practising law is not his or her primary occupation. A 2014 survey by Altman Weil, a US legal services management consultancy, found that GCs spend about 33 per cent of their time advising executives, 25 per cent practising law, 23 per cent managing internal lawyers, and the remainder on other business-related tasks.

‘A good general counsel is someone who knows how to organise legal services, knows how to purchase them, but you don’t necessarily have to be the sharpest crayon in the box legal-wise for every specialisation in order to be an excellent general counsel,’ Prof. Heugens says. In fact, he adds, the managerial aspect is now such a big part of the role that some GCs don’t even have a legal degree but, for example, come from a compliance background.

The best GCs advise on all aspects of the company’s strategy, while keeping a close eye on the legal consequences of an action. They are also conversant with the company’s general business risks, as these days the headline risk of an action is often just as important as bright-line legal risks, according to Prof. Heugens.

‘Probably the biggest difference between the general counsel and the traditional in-house counsel is the fact that you have closer contact with the board, and through that you’re getting confronted with certain issues that come up very early in the strategic discussions,’ says Vitali.

Besides being a good manager, today’s GC needs to be a skilled politician too, maintaining good relations with the entire company. Finally, the best GC is a smart service architect, able to develop the most cost-effective combination of in-house and external expertise.

Back to school

That’s a lot of ground to cover, and many GCs believe they have much more to learn. The national General Counsel Benchmark Survey 2014 conducted by GCN found that many GCs in the Netherlands want to learn more about business and how to become a modern legal business leader. ‘Most of these people have ten to 20 years of experience and legal experience, and they work for organisations, but lots of them feel the need to be educated more from a business- school perspective,’ says Van Hilst.

To meet that need, GCN and RSM have developed the world’s first academic executive education programme intended to teach GCs business strategy and prepare general counsels for future challenges internally and externally. In six modules of three days each, spread over 18 months, instructors provide the participants with indispensable knowledge and skills, as well as broad analytical concepts, tools and the mindset needed for GCs in the near future, Prof. Heugens says.

Vitali, a member of the first year’s class, says he has been impressed with the GC curriculum so far. ‘They really try to put themselves in our shoes,’ he says.

More information

General Counsel Executive Programme

The only high-level business programme designed specifically for the new challenges that GCs encounter, its primary focus is not on technical legal skills, but on increasing their business acumen. The programme, aimed at GCs around the world, unleashes enormous opportunities for innovation, leadership and decision-making at the highest levels associated with their position as companies become more international, and with compliance, governance, reputation management, privacy and ethics ranking high on corporate agendas.

This article was first published in RSM Outlook summer 2016. You can download RSM Outlook here.

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RSM Outlook , 2016 Summer RSM Outlook