Many Hats
In addition to all of the usual tasks, today's GCs are often assigned oversight of various non-legal, non-revenue-generating areas. Some even manage their companies' business development activities. "The mantra seems to be: 'If it doesn't fit somewhere else, give it to legal,'" as one GC explained.
This was borne out by our interviewees. While the GC of one of Weight Watchers' subsidiaries, Fiarman also held the title of vice president of business development; as GC of Take-Two Interactive Software, Seth Krauss has also managed internal audit, risk management, insurance and security; while GC at Covance in the 1990s, Jeff Hurwitz was chief of compliance, HR director, head of environmental health and safety, and oversaw the company's Y2K program. During his tenure as GC at Global TeleSystems Inc., Raclin held several positions, including CAO, which involved the oversight of HR and facilities, among other areas. In addition, he helped manage the restructuring of the company with the CEO and CFO. While GC at Charter Communications, he was responsible for the programming, procurement and business development divisions. "Anything that principally involved negotiations," he explained.
"There is a definite need for GCs to know other subjects outside of law," according to Fiarman. "There isn't a road map for many of the things you'll be tackling. You're often the first one trying to figure something out, so you have to be comfortable dealing with uncertainty and establishing precedents. To try and assess potential risks can be difficult when something has never been done before."
Compliance, Governance and Protecting the Client
When asked what has had the biggest effect on their roles during the last several years, GCs ranked compliance and corporate governance the highest. Regulations like Sarbanes-Oxley, Dodd-Frank, the Foreign Corrupt Practices Act and the UK Bribery Act have dramatically increased the amount of work and pressure on the GC. While outside counsel advise clients on how to comply with new regulations, GCs are expected to help develop plans and timelines, and assume, with other business leaders, the risks of noncompliance.
Managing reporting lines is also extremely important. For instance, some chief compliance officers report to the board or CEO; others report to the GC, with a dotted line to the audit committee. "At Scientific Games, the CCO reported directly to the audit committee as well as to me and it worked quite well," Raclin commented. The key is to avoid potential conflicts and increase the level of interaction and knowledge among all the necessary parties.
While GCs must answer to government regulators, shareholders, boards of directors and management, all of the experts pointed out that the GC's foremost responsibility is to protect the company. Investors want short-term profits, while the CLO and other members of the management team are more concerned with the company's long-term success. This can lead to struggles, because most people on boards have held prestigious positions in government or business and are used to getting their way. It can be difficult to tell them no. But it is the GC's job to point out risks and offer carefully considered counsel. "You have to be independent, have excellent judgment and top problem-solving skills," noted Hurwitz, retired senior vice president, general counsel and secretary of Dun & Bradstreet. "And you have to remember your allegiance is to the corporation, not to a specific individual."
Social Media, Data Privacy and Other New Concerns
Just when you think you've mastered the job, GCs said, new responsibilities land on your desk. "The practice of law is dynamic. You have to be facile and keep up with what's going on," Krauss said.
A recent example is the need for policies regarding usage of the Internet and social media. The advent of forums like Facebook, Twitter and LinkedIn has led some companies to run up against privacy issues while trolling for information about new hires and/or when employees post things that could potentially expose them to liability. The utilization of these forums to market companies' products has also created new challenges. The technology and how people use it are changing so fast it's hard to keep up. How do you facilitate this type of communication, but also control it and keep the company safe? Most GCs revise their Internet policies frequently, but said it is a constant struggle to keep them up-to-date.
Another new area of concern is data privacy. "The government is considering rules that are going to be applicable to every company that collects information about its customers," said one GC. "Even something as innocuous as a dry cleaner will be subject to new privacy regulations. Legal departments are going to have to get in front of this and stay involved. Most companies will probably end up producing detailed privacy codes, much like a terms and conditions document."
GCs who work for multinationals have another concern when it comes to privacy. "I wish there was a more uniform approach to data collection. There are different rules for different countries. Dealing with data flows between Europe and the U.S. definitely adds a level of complexity," Fiarman observed.
Another area that is taking up more of a GC's time these days is patents. The stakes surrounding intellectual property have increased significantly and a GC must be ready to protect his or her company's portfolio. "Defending patents was by far our biggest expenditure last year," one GC said. Employment issues can also pile up in the GC's office, said another. Perhaps as a result of the recession, "there is a lot of litigation that didn't exist four or five years ago, and the GC will be held accountable."
As our interviews and the KPMG study underscore, understanding your company's business is essential to being able to offer appropriate counsel, negotiate commercial interests and anticipate problems. Today's GCs need to help determine and navigate a strategic vision, be ready to take on a multitude of roles, and keep their companies out of trouble.
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