When the insider trading and backdating scandals occurred in the last decade, many asked, "Where were the lawyers?"
"We were there," remarked Stasia Kelly, currently a partner at DLA Piper who previously served as general counsel of Fannie Mae, Sears, MCI/WorldCom and AIG, "but we weren't being invited to the important meetings."
New regulations and increased expectations from shareholders, company executives and board members have led to profound changes for today's chief legal officers. Not only are they being invited to the meetings now, they are expected to make key contributions. A number of active and former GCs were interviewed to find out what their biggest challenges are and how the job has evolved over the years.
Knowing the Business
The two biggest changes, according to GCs, have been: (1) a greater emphasis on knowing the company's business and (2) the assumption of non-legal tasks.
In addition to identifying and minimizing areas of risk, GCs are now, in most instances, seen as value-added, C-level partners and are expected to bring a commercial focus to the dispensation of legal advice. When Kelly became GC of Fannie Mae in 1995, "Nobody thought about explaining the company's strategy to the GC," she said. "That attitude has changed. Now you need to understand the finances and what is going on in the company. The lawyers need to be in the room."
To ensure you have a seat at the table, you need to "demonstrate that you know the business. It gives you credibility," explained the GC of a Fortune 500 multinational company. It also shows that when issuing opinions, you will factor in what it takes to run the business and help it succeed. This knowledge is important for the entire legal team. During his tenure as senior vice president, general counsel and secretary of Hewitt Associates, Steve Kyono embedded his lawyers in different departments to learn what was going on. "They attended department meetings, visited our operations centers and sat in on overviews of the company's strategic and operating plans. They also went to meetings with senior leadership so they could understand their views and the direction they wanted to take the company."
This helps establish mutual trust and respect, and shows that, despite the stereotypical impression that lawyers say "no" most of the time, they can help in proactive ways. As another GC put it: "Lawyers have been trained to think things through logically; we ask a lot of questions; we help identify problems before they occur."
"You want to be brought in early, to help influence and direct a project, instead of after the fact, when it might be too late," agreed Jeff Fiarman, executive vice president, general counsel and secretary of Weight Watchers. As KPMG's recently released 2012 general counsel survey "Beyond the Law" concluded: "The GC's role is moving from one of 'fire-fighting' and reacting to events to being more strategic and anticipating risks at an earlier stage."
Basic Financial Acumen
In addition to knowing the specifics of what your company does, you also need a working knowledge of accounting principles. "Basic financial competence is extremely important. You should know how to read a balance sheet and P&L statement, understand basic terms such as ROI and EBITDA and, of course, know how to create, track and enforce budgets," noted Grier Raclin, former senior vice president, general counsel and secretary of Scientific Games.
The KPMG survey corroborated this point: The skills that will stand GCs well in the eyes of company leaders include "being more commercially and financially aware in order to take a more proactive stance in risk identification and assessment and working in partnership with others across the organization."
"Before going in-house, I recommend two things: a business degree of some sort and a secondment to an in-house legal department to get an idea of what life is like as a client," said George Miller, senior vice president, general counsel and secretary of Sigma-Aldrich. "The degree isn't as important as understanding what it means to manage a business to the bottom line and having empathy for the pressures and risks associated with that." Another option for getting up-to-speed might be the Association for Corporate Counsel's Mini MBA program.
GCs also have to manage the legal department. Though this isn't new, it is worth mentioning because it requires skills that are not native to most lawyers e.g., mentoring, motivating and deploying talent, appraising job performance, defusing conflicts, identifying and grooming successors, creating budgets and controlling costs. "It's like running a little company," noted one GC.
The recession and increased focus on profitability have made the financial aspects of the job even more critical. "Managing the bottom line has become much more important. Budget pressures go up every year," another GC said. "Last year, I didn't know if I'd be able to meet my budget for the first time in my career. We had to work really hard to decide which things we were going to push for. You need to know what's important for your company in order to make those kinds of decisions."