General counsel to US companies are faced with heightened opportunity and pressure, perhaps more now than ever before.
Opportunity because of the extraordinary expansion of many corporations into new territories, which is presenting fascinating business and legal issues and dynamic, challenging roles. Pressure because with growth comes risk, and the most acute risk for general counsel is to fall short in demonstrating value to the executive leadership.
Leading general counsel in the US today have their vision firmly focused on a grander, more powerful definition of their position within the corporation. They are no longer confined to the legal function; the emerging role of the sophisticated general counsel might be as the ‘navigator’ – one of the company’s most valued executives.
As a navigator, the head of legal is in tune with business dynamics and the factors that affect corporate performance. He or she is a close adviser to the corporate leadership and routinely included in corporate governance. This general counsel alerts executives to the legal, regulatory and other risks of business activities. But more importantly, the general counsel focuses on crafting and enabling proactive responses to those risks, assisting the business to grow effectively around the world.
For this general counsel, moving up the corporate ladder is part of their success.
While not every senior counsel consciously envisages this role or describes it as above, nearly all agree that the pressure to perform has increased. Why?
Shareholder value, globalisation and corporate consolidation.
A few trends have converged to influence the general counsel of US corporations to put significant energy into improving their position on executive row.
First, the movement starting in the late 1980s to weed out middle management and transform the company’s managerial ranks to lean and mean producers has forced general counsel to demonstrate their value in ways they often never had to before. This trend saw the meteoric rise in status of the chief financial officer, who joined the tight circle of top executives.
General counsel who have not effectively demonstrated their contribution to the business have typically seen their position (and that of the legal department) slide down the corporate ladder.
Second, the ever-growing, ever-present focus on shareholder value that forces companies to practice sophisticated financial management and continuously hone their revenue and expense streams has also touched the legal department.
In addition to running lean and mean, general counsel must be able to communicate how they enhance shareholder value. If added value is hard to prove, they must at least show how they reduce expenses by effectively reducing risks that could otherwise prove costly. The alternative can be relegation to back-office status, where counsel may lose the ability to proactively influence change in the organisation.
Third, many corporations have restructured their organisations in recent years to follow the globalisation of their businesses. A typical result is the decentralisation of the legal function. Corporate counsel are often aligned with major product groups or lines of business whose territory spans the entire world.
The general counsel for the paper products division of a major consumer product company might be based in Latin America, even though his or her territory spans the world and the corporate headquarters is in Chicago. The chemical products general counsel might be in Frankfurt. With this dispersal of management, ambitious senior counsel must be able to effectively present their value to corporate leadership – often remotely – for their careers to advance.
Fourth, and perhaps the most important trend, is major consolidation in the corporate arena, which means that no senior manager’s job is safe. When companies merge, there is typically only room for one general counsel. The wise head of legal pays attention to cementing relationships with senior executives and positioning him or herself to succeed – whether with the current employer or another – if consolidation occurs.
So how does the visionary US general counsel influence his or her upward mobility? There are several tactics.
Getting closer to the business
When 20 general counsel of major US corporations gathered to discuss ‘Improving the performance of your in-house and outside lawyers’ at Martindale-Hubbell’s Counsel to Counsel forum in Chicago this spring, they agreed that strategic value could best be added by aligning the legal department with the business units.
General counsel from a major financial institution and a giant insurance company said they assign a senior internal lawyer to each line of business who sits on the management or operating committee for the business. Often senior counsel request formal feedback from business managers regarding the performance of in-house lawyers. They are attuned not only to the legal results achieved, but to the in-house lawyer’s understanding of the business and ability to adhere to time and budget constraints. In addition to keeping internal clients happy, this feedback helps hone the counsel’s understanding of what is expected and valued.
A general counsel of a large US infotech company recently told me that his legal department develops yearly plans and objectives after the business plan for the company has been set. The legal department’s plan is tied directly to key strategic objectives for the business. Throughout the year, the general counsel updates senior executives on the legal department’s progress against objectives, always in the context of how they relate to the overall corporate plan.
