The scope of a general counsel or legal chief officer’s responsibilities has expanded manifold over the past decades, as new risk factors emerged at an alarming rate. Think not only digital transformation implications, new data privacy regulations and increased cyber vulnerabilities but also intensifying scrutiny into culture, values and diversity practices; the mounting social call for enhanced sustainability and corporate responsibility; and the now very real post-Covid considerations of workplace safety.
Against such a broad scope of risks and an increasing flow of disruption, Chief Executive partnered with BarkerGilmore, an executive search firm specializing in legal and compliance functions, to survey more than 100 CEOs on the role and value of their GC. What we found is that private companies lag their public counterparts in recognizing the value of the legal chief as a member of the senior executive team (57 percent of private companies do vs. 96 percent of public companies).
Only 40 percent of private company CEOs view their GC as a strategic business partner and a valued member of the leadership team. What’s more, none of the CEOs in our survey say they believe one of their GC’s biggest value contributions is to business strategy.
While it is true that, on average, private companies tend to be much smaller than their publicly traded counterparts, and legal chiefs at small and mid-sized companies (up to $1 billion in annual revenues) are typically entrusted with more corporate administrative duties than strategic advisory roles, the value the GC can bring by providing early legal input into the strategy and how this impacts operations is unparalleled, regardless of size.
One of the respondents in our study illustrated the importance of the GC at the executive table by saying that for a CEO, not having a GC who is able to serve as a strategic adviser is the equivalent of a coach at a sporting event with one person missing on the field. Lawyers are trained to think differently than CFOs and COOs, so the “lawyer way” of thinking simply adds value to discussions through diversity of thought and approach to a situation. Every individual in a key role, including, of course, the chief legal officer, should contribute perspective on strategy.
Mike Cote, CEO of SecureWorks, Dell’s cybersecurity services operator, agrees with this premise and says he expects the people in his C-suite to be able to contribute not just in their functional area but across the various functions as a unified entity, “where we respect each other for our opinions and thoughts, taking the customer’s view, taking our shareholders’ view, taking our employees’ view and really looking at this from a holistic perspective coming from their specific discipline.”
Private company CEOs would stand to gain from viewing the GC as a strategic risk partner. Certainly, there are legal matters that have to be dealt with, but the GC can help you think through the implications of risk and, therefore, the appropriate action. This is particularly true against our modern backdrop, as we welcome a new digital-native generation into the workplace, uncover the power of new technologies, adapt business models to a post-Covid-19 reality and work to implement more sustainability and socially driven initiatives. Those all present tremendous opportunities for growth—and for change—but they also carry a significant amount of new risks.
What’s more, the risk analysis isn’t always about if something is legal or not legal; it’s about the full chain of consequence from a single decision—or lack of action. Incorporating the GC into those early discussions is about doing what the company feels is right from a stakeholder perspective and having the conversation to make sure it is aligned to those expectations. Generally, on all topics, regardless of if they are legal in nature, a good GC can bridge the gap between departments and make sure each department understands the risks when evaluating when and if to make decisions.
As the economy continues to reopen and we recover from the Covid-19 crisis and temporary shutdown, companies will need to revisit their business model and operating structure to assess vulnerabilities they may not have recognized earlier and identify areas of opportunity moving forward. CEOs must give their legal chief a seat at the table, one where the individual is pushed beyond his/her legal comfort zone or practice area to, ultimately, show that he/she understands the business, the industry, the overarching strategy, culture, mission, etc. After all, high-performing general counsel are business-savvy advisers on a wide range of issues and fully functioning members of the leadership team—who just happen to be attorneys.
Companies with GCs scheduled to retire within the next two to five years or those who still lack that essential function among their ranks need to start considering how to make that next strategic hire, one who will be equipped to wear the multiple hats the role of the counsel now requires.