June 24 Addendum: Now that the world’s fifth largest (according to BBC’s newscast last night) economy has voted to leave the EU, my article posted June 23 has new significance. The overall message below remains, as exemplified in a message I received this morning from a European GC: “As of today, the biggest activity is within asset management. The legal division remains calm, and the cross function teams (which were already in place) now know that there is a busy period to come and we have time to get organized. Our eyes and ears will remain focused on UK movements but I do not expect any panic; things should unfold in an orderly manner.”
The destablizing effect of the Brexit vote can be unnerving and distracting. In-house legal leaders have learned to balance emotional with rational; you know how to stay calm and extend that calm to others. For those of you in a company or personal situation that may be greatly affected by the UK vote, this will be a good test of your abilities.
In the last year I’ve heard from global in-house legal and compliance counsel the increasing importance of following political, social and economic trends in their organizations’ markets. To those in-house counsel in businesses with European coverage, your horizon-gazing skills will be in great demand in the coming months.
Corporate leaders and stakeholders will seek insights from you to help make decisions, identify the key issues to deal with now, and those that can wait until later. You will be a valuable resource to help your organization respond and prepare for the constant in our global economy: change.
[The original artcle follows]
If you’ve been reading international news, you’ll know that financial markets and a lot of Europe are watching the British referendum vote today on whether to exit the European Union. Apprehension and speculation is all over the media.
Within the world’s larger corporations, what’s the buzz? I had conversations in the last 36 hours with a number of general counsel with global corporations (across several industries) with activities in dozens of countries on both sides of the pond and throughout mainland Europe.
The big news? They generally seem prepared and relaxed, and are busy keeping up with everything else on their plates. These legal leaders clearly know something about dealing with developing issues—to not get too worked up about it until the dust settles.
A financial services GC for EMEA said: “We have done some high level financial risk analysis of the potential impact, but nothing in depth given the uncertainty, and nothing specific from a legal perspective. The main activity has been on communication if the vote is for a Brexit.”
Another regional legal chief in a Fortune 50 company told me there wasn’t much of interest to share. “So far I’ve not done much about a possible Brexit short of informing management of all legal consequences in the short to mid-term,” this GC said.
A global regulatory head in a large IT company spanning the globe commented, “I am not aware of us doing anything. My sense is that this is partly because the impact to our business is limited (if any) and partly because most people think the U.K. will stay.”
Nearly everyone I spoke with felt it was too early to tell what the implications will be after Friday morning’s news of the vote outcome. They feel there will be plenty of time to get more clarity about England’s and Europe’s next steps, whatever the decision. If there is a Brexit, Great Britain’s process of repealing EU-legislation and regulation will take years. Questions remain about how an exit would involve non-EU countries such as Switzerland, Norway and Albania.
No one is yet clear whether a Leave vote would lead immediately to an “Article 50” notice from the U.K. triggering the two-year process, or if that would be delayed.
The global general counsel of a UK-based company with activities in more than 60 countries told me they did not have any Brexit contingencies in place, simply because they felt the company would be relatively unaffected (at a micro level) by whether the vote was “stay” or “go.” The reason this GC felt that they would be unaffected was that only a small portion of their business is in the U.K., the business activities are mostly local, and given their minimal cross-border movement of people or products, they are less exposed to international tariff changes. The company’s financing is already in a mix of currencies, this GC said, and with contracts almost always local/single country, there is little concern about enforcement and jurisdiction.
The UK-based general counsel who seemed to have given the most thought to the issue summarized for me a few medium-term issues that companies active in the UK will need to address:
- navigating a more complex regulatory framework with UK and EU regulation diverging (IP, product, safety, data privacy, financial)
- recruitment challenges in an already tight UK labor market for frontline staff
- economic pressure both in short-term uncertainty and transition, and if (all) the economists are right and this puts UK on a weaker growth and performance path
One legal chief did speak out about the surprising lack of activity in the company’s risk management area on a possible Brexit. This individual said that even though the (mainland-Europe headquartered) Group has thousands of employees and production sites in the UK, executive leadership had chosen not to address possible outcomes yet. The legal chief’s own perspective was that many Europeans found it all a bit of a joke, that surely the Brits wouldn’t be foolish enough to shoot themselves in the foot. But, he wondered aloud, no one has looked either at the consequences for business of a vote to remain.
Stay tuned. This is going to be interesting.