Setting the Agenda for General Counsel in China and IndiaCatherine Dunn Corporate Counsel
12-06-2012
As much as a company’s corporate culture can dictate a general counsel’s agenda, so too do a country’s legal and business cultures shape the broader context of a GC’s job. Within China’s legal system, for example, in-house counsel gained a significant foothold in the early 2000s, when the government began to implement general counsel offices for state-owned enterprises. In India, recent corporate governance reform efforts are raising new regulatory issues for company law departments.
Two new reports from ALM Legal Intelligence (a division of CorpCounsel.com parent company ALM) show how general counsel in both countries are responding to their local environments—whether within the company, or in relation to outside counsel.
“Corporate Counsel China: Agenda 2013” gets at the dynamic between general counsel and the board, and between general counsel and business unit leaders. The report is based on 101 responses, 98 percent from GCs or chief legal officers (the rest came from deputy general counsel). Nearly half the respondents represent manufacturing companies.
In China, the in-house reporting structure differs from the U.S. norm. A survey conducted by ALM earlier this year found that 63 percent of GC respondents in the U.S. report to the CEO, 22 percent report to the board, and 17 percent to the chief financial officer. But in China, most GC respondents—60 percent—report to the board. Another 40 percent report to the CEO, and 9 percent to the CFO. (The tally adds up to more than 100 percent because some GCs report to more than one position.)
It’s worth noting that CEOs often serve as board chair, “and the board simply ratifies his decision,” according to comments in the report from Randall Lewis, Danone’s associate general counsel for Asia Pacific.
Given the reporting structure, “it’s perhaps not surprising that 50 percent of GCs believe their relationship with the board is the one that most needs improvement in the coming year,” the report finds, “compared to only one-fifth who feel they need to tend their ties with the CEO.”
Forging better communication with business unit leaders is a priority for most Chinese GCs; 58 percent said they wanted to meet more frequently with those counterparts in order to become more involved in business and corporate strategy.
Indeed, Chinese in-house counsel may often be excluded from a company’s “core strategy team,” according to the report, in a country where historically deals have been based on relationships, not documents. “They are usually brought in only after [executives] have decided to go forward with a deal and after the fact to document the transaction,” according to Lewis.
As far as their biggest challenges go, “half the GCs named keeping business leaders happy with their department’s performance” as a main preoccupation, the report finds, “and a further third wanted employees and the board to recognize the value of a strong legal department.”
Additionally, doing more with less and regulatory compliance ranked high on that list. “Just over 40 percent of GCs felt their departments were under pressure to do more with fewer resources; an equal number said ensuring regulatory compliance by companies in their supply chain was a major concern,” the report states.
Pan over to India in ALM’s other report, though, and compliance emerges as a major concern for most respondents. “Creating a culture of compliance within the company was identified by a majority of GCs as the area they most wanted to improve,” according to “Corporate Counsel India: Agenda 2013,” which collected 134 survey responses. Of those, 74 percent were completed by general counsel or CLOs, and the rest by deputy general counsel.
Regulations are also keeping India’s in-house counsel busy. “Top of the list of things likely to keep Indian GCs awake at night is the growing burden of keeping up with new regulations,” the report states.
Why? Part of the reason owes to the changing nature of corporate governance. While industry groups have pushed to improve governance standards over the past decade, the Securities and Exchange Board of India “has adopted a more assertive stance and stronger regulations,” according to the report. New legislation to enhance corporate accountability, called the Companies Bill, is also expected to replace a law that dates back to 1956.
The corporate sector is also feeling the heat from India’s Competition Commission. “The Commission slapped a $1.2 billion fine on an alleged cartel of 11 foreign and domestic cement manufacturers and their industry association for price fixing,” the report states.
That was an unusual enforcement action, according to Arshad Khan, executive director of Khaitan & Co.’s national competition practice. “In the past, the alleged cartel would have received a slap on the wrist,” Kahn told the report’s authors.
GCs in both countries have some bones to pick with outside counsel. In-house counsel in China (32 percent) and in India (42 percent) identified matter management as the number one aspect of relationships with law firms they’d most like to change next year. The overall cost of legal services ranked second among both Indian GCs (20 percent) and Chinese GCs (28 percent).
To learn more about or purchase the China and India Corporate Counsel Agenda reports, visit ALM Legal Intelligence online here.
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