You must be legal leaders and manage the legal needs of your company. You must provide legal advice as well as anticipate and manage risk. You must manage vendors and outside counsel in a fiscally responsible manner. You must be adept at developing and motivating staff. You may be resource constrained while operating in a competitive environment and a world where regulations proliferate and their complexity increases. And you now must function with an increasing level of scrutiny from your board as well as the media and the government.
Compliance is a top priority for general counsel and chief legal officers around the world. For the sixth straight year compliance professionals named the complexity of regulatory and legal environments as their top challenge, according to the 2013 ACC/Corpedia Benchmarking Survey. The ACC 2014 CLO Survey listed compliance and “regulatory and governmental changes” as the top two issues most likely to keep GCs and CLOs “up at night.”
Not only in the United States, but regulatory bodies around the world have ramped up their efforts and show no signs of scaling back their investigations — so company boards and senior management need to take note and develop and nurture robust compliance systems.
We all recognize the importance of building an organizational structure with compliance infused at every level. Ben Heineman, the iconic former GC of General Electric, frequently refers to this as “the fusion of high performance with high integrity.” He believes the general counsel should play a key role in a corporation’s efforts to establish a governance model that will enable it to achieve this goal.
To do so, a GC must perform a delicate balancing act between being trusted and active members of the management team, i.e., being a business partner while concurrently serving as the guardian of the company’s integrity and reputation. Sadly, in recent years, we have seen several scandals that provide examples of GCs and CLOs who failed in their guardian responsibility leading the media and sometimes regulators to ask the question “where were the lawyers?”
Recently, we have seen many regulatory agencies and advisory groups issue rules or guidelines concerning board governance. Extending compliance and governance initiatives further into the corporation likely will be necessary. The general counsel should play a critical role in such initiatives. The GC can facilitate the efforts to identify and create or implement the conditions, principles, and practices that lead to good governance.
Many boards see the GC or CLO as the logical facilitator for such efforts since they already provide significant value to the corporation through counseling the board and management. I noted some of the specific skills and expertise necessary to do this in a previous column.
A director who serves on the board of several global companies provided the following detail:
“I want someone who has the capacity to distinguish between individual situations and systematic issues. So I want someone who can spot trends, who can help the board understand [whether] this is a one-off situation and it’s an exception, or is this a cultural issue that we need to address, or something that hasn’t been well enough communicated or complied with in the organization that needs a broader effort. That’s very important.”
A board member with experience as a general counsel described it this way:
“You really look to that general counsel to watch your back as a board member. You just have to feel like the person in that role has a really good understanding of the nuances of the rules and how they work within your company and industry.”
I believe one of the best ways for a GC to learn is from the experience of your peers. So, for practical advice about how to deal with the “partner/guardian” tension or generally about how to improve the governance model in your organization I encourage you to join Simon Fish, the GC of Bank of Montreal and Stephen Sigurdson, GC Canada of Manulife Financial in the session on “Corporate Governance and the Role of the GC” at Emerging Global Trends for Corporate Counsel conference June 19-20 in Toronto.
Is corporate governance a challenge? Yes, but I also believe it is an additional opportunity for GCs to provide real value to their client.