Looking Glass 2021/22 - Part 3: The role of the GC

Looking Glass 2021/22 - Part 3: The role of the GC

PART 3: THE CHANGING ROLE OF THE GENERAL COUNSEL (GC)

INTERACTIVE PDF – OPTIMISED FOR DESKTOP

2

Contents

19

03

21

04

05

22

23

06

3

Foreword by Clyde & Co

The third and final part of our Looking Glass report considers the role of the General Counsel against the backdrop of the continuously evolving risk landscape and the related risk management challenges explored in parts one and two. It is clear that one particular element of the risk landscape – the pandemic and its associated risks – has had a significant, and positive, influence on the role of the GC and its relationship with the board. Businesses are now operating in an environment transformed by the demands and opportunities brought about by the pandemic, and this year’s survey suggests that overall GCs have secured an enhanced reputation and seat at the table thanks to the value they have provided since our last survey over 18 months ago.

Where last year many GC and board respondents indicated that the pandemic and its associated challenges had given them a renewed sense of purpose, this year we see the GC role continuing to expand in responsibility and GCs and boards continuing to converge in perceptions about the role. We can see GCs and boards more united in their view that GCs should be an enabler helping the business to be on the front foot and acting as a horizon scanner, pre-empting issues and proactively assessing the risk landscape. But there is still some road left to travel to ensure that the role of the GC can provide maximum value to the organisations they serve, with the report identifying misaligned expectations and a sense that more could be done to allow GCs to help shape the future rather than simply respond as issues unfold.

With success comes raised expectations and that is the situation many GCs now find themselves in and one which most will relish. However, it is crucial they receive the support they need, from their teams, from technology and, of course, by the private practice support they instruct and receive. Not only can law firms support GCs grappling with increased expectations, workload and pressure to deliver more with less, they can set themselves apart by helping GCs understand the risk landscape. And further, by helping them better communicate the commercial and strategic value of the legal function so it continues to retain its seat at the leadership table. We would like to thank all those respondents who have participated across all three parts of the Looking Glass report and provided such invaluable insight.

4

Introduction

A warm welcome to the third (and final) part of Winmark and Clyde & Co’s Looking Glass report. In this section we explore how the GC role is adapting to an era where the war in Ukraine, digital transformation, increasing regulation, the pandemic and climate concerns have been adding further complexity to an already challenging business risk environment. The Looking Glass has tracked the evolution of the GC role for over 10 years. During that time the breadth of responsibilities has continued to expand well beyond stewardship of reputation, compliance and governance to encompass stakeholder communications, relationship building, strategic management and increasingly demanding operational management.

This year’s study finds GCs discovering a renewed sense of purpose and enjoying an increasing recognition of their strategic value from Board Directors, CEOs and C-Suite executives. Sincere thanks again to the 140+ senior leaders who have shared their knowledge, insights and experiences; and please seek out the first two parts of the Looking Glass report - the first examining the overall risk landscape in detail; and the second taking a deep dive into the three topics currently dominating board agendas — digital transformation, climate change and post-covid risk.

John Madden Research Director, Winmark

5

Executive summary

The role of the GC

– Many GC and board respondents feel the pandemic has given them a renewed sense of purpose within their organisations. As they have become more active in executive management teams, they are increasingly expected to drive innovation and value within their organisations. – The GC role continues to expand to play a central role in governance, leadership, strategic vision and change management, and is taking on more responsibility for company-wide compliance and environmental, social and governance (ESG) implementation initiatives. – As a result, horizon scanning is becoming more important than ever, particularly predicting the potential impact of legal and regulatory changes. Regularly conducting formal reviews of the risk landscape and regulatory trends is becoming an essential aspect of the GC role. – For three years in a row, perceptions of the GC role among board respondents have become more closely aligned with GC’s own perceptions. The role continues to evolve into one of a business enabler that works collaboratively across all departments, and with greater potential to have visibility, influence and impact in the business. C-Suite executives across other departments also share these perceptions and recognise the valuable strategic contribution of GCs.

– The perception of GC performance has improved amongst board respondents. 68% of board respondents say GCs are performing ‘very well’ or ‘to an outstanding level’ compared to 50% last year. This continues a trend of increasing recognition by the board of the contribution of the GC. – The GC role will become increasingly co- operative, collaborative and cross-functional; and able to demonstrate strategic influence and credibility. This will require an expanded skillset.

6

The role of the GC

Factors driving change in the GC role

Last year, many GC and board respondents felt that the stress test provided by the pandemic had given them a renewed sense of purpose that could be harnessed into the future. This year’s research suggests that their positive outlook has been maintained. The GC role continues to grow beyond strictly legal boundaries to expand into communications, reputation and crisis management tasks; and to play a central role in governance, leadership, strategic vision and change management. Boards, GCs and C-Suite executives are in agreement about the factors driving change in the GC role, although there is some difference in emphasis. Unsurprisingly, ‘Dealing with specific legal and regulatory developments’, which is what many will see as the core role of an in- house legal team, is the main driver. However, ‘Specific commercial risks that need to be managed’ and ‘Changing demands from internal clients’ are also strong drivers for change. As GCs become more active in executive management teams, they are increasingly expected to drive innovation and value within their organisations.

The GC role is not only there to provide legal knowledge and judgment to the board and the senior management team, it is also expected to contribute to the broader strategic and commercial leadership of the organisation. The survey results suggest that GCs need to work closely with colleagues across functions (such as in procurement and commercial contracting departments) to collaborate on decisions and ensure the right digital tools and processes are in place to deliver value. They also need to lead digital transformation of processes in their own departments through implementing legal technology such as contract review, analytics and management tools that streamline timelines. As a result, it seems the view of the legal department as an independent entity detached from the rest of the business has been gradually replaced with a model where it works as an integrated part of the strategic management team. This necessitates GCs taking a truly long- term view of the impact of legal decisions on the organisation and its stakeholders.

7

The role of the GC

Top factors driving change in the GC role

GCs are continuing to be asked to do more with less, with changing demands and cost pressures, especially against the backdrop of the pandemic. But equally, we have seen GCs recognising the need to change their perception as a ‘blocker’ – that they can’t just say ‘no’. Instead, they need to become an enabler – a creative decision-maker that collaborates with the board and C-suite executives on finding the right solutions for the benefit of the business.

C-Suite Exec

All

Board GC

Top 3 highlighted in green

60% 49% 48% 36%

48% 62% 69% 31% 62% 50% 38% 68% 31% 21% 46% 38%

Specific legal and regulatory developments

Specific commercial risks that need to be managed

Changing demands from internal clients

Cost pressures that require improved efficiency Ability to leverage new technologies to redesign processes and workflows

34%

34% 35% 31%

34% 27% 15% 13% 10%

17% 49% 31% 31% 22% 31% 14% 16% 15% 10% 22% 4% 10% 5% 15%

Ability to work anywhere/anytime

Ability to unbundle and outsource legal services

The impact of COVID-19 on the role of the function

Changing legal career paths

Innovation by external legal suppliers

Daniel Lever, Partner, Clyde & Co, Miami

8

CONSTRUCTION

ENERGY, MARINE & NATURAL RESOURCES

The role of the GC

In the construction industry, the pandemic has generated a desire on the part of entities to streamline themselves, with fewer roles taking on more responsibilities against the backdrop of a smaller labour pool and changing relationships with suppliers. GCs should continue to be at the heart of these decisions, with legal and regulatory risks a major driving factor in commercial risks. Yet, the survey results suggest a misalignment of expectations relating to the GC role, which needs to be addressed through more effective communication between boards, GCs and the C-suite.

It is not surprising that legal and regulatory developments are the top factor driving change in the GC role. The increased regulation across industries such as energy, marine and natural resources requires businesses to be readily adaptable to the fast-changing landscape. Furthermore, with the increase in reporting of regulatory breaches and investigations in these industries, the GC and legal function’s role in managing this risk moves higher up the agenda. This increased focus on regulatory and compliance issues can also be seen in the Looking Glass Report’s finding that across all respondents, “advising the board on legal, risk and compliance issues” is one of the top three perceptions of the GC role and securing compliance with those regulations is in the top three functions of the GC. As the regulatory environment continues to evolve with increasingly severe penalties for breaches, the GC and legal function’s role in advising and managing is only likely to increase.

Seema Lal, Partner, Clyde & Co, Vancouver

Leon Alexander, Partner, Clyde & Co, Singapore

9

Perceptions of the GC role

The GC role increasingly requires in-depth knowledge of regulatory regimes and government policy and is taking on more responsibility for company-wide compliance and ESG implementation initiatives. This makes horizon scanning more important than ever, particularly when predicting the potential impact of legal and regulatory changes.

For three years in a row, perceptions of the GC role among board respondents have become more closely aligned with GC’s own perceptions of what they do, particularly on the amount of time spent ‘Working on strategic legal projects’, ‘Advising the board on legal, risk and compliance issues’ and ‘Working on strategic projects across the wider business e.g.: ESG’.

Regularly conducting formal reviews of the risk landscape and regulatory trends is becoming an essential aspect of the GC role. Key regulatory issues include legislation around climate change and ESG (such as the UK’s Environment Act). This is having a major impact across most industries, with supply chain management and processes particularly affected. GCs are having to implement evermore demanding supply chain partner due diligence procedures, such as ensuring supply chain partners document their own ESG credentials. GCs are also having to ensure that supply and procurement practices, and contractual arrangements, are not only legal (and, as far as possible, futureproof), but consistent with commercial goals. GCs have also had to understand and plan for the global impact of Brexit on trade, employment and >Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24

Made with FlippingBook Ebook Creator