Compliance, Commerciality and Corporate Responsibility: The Evolution of General Counsel
The role of General Counsel (GC) has undergone a significant transformation in the last decade. The emergence of the function coincided with the global financial crisis in 2008 and the heightened regulatory scrutiny that followed. Today, in-house senior legal practitioners are tasked with a broad array of responsibilities that are often integral to business processes, including, but not limited to: compliance, ethics, risk, commerciality, legality and client engagement.
Many major law firms and financial institutions alike have appointed a GC in recent years. There is currently no formal requirement for companies to install a GC, but doing so can increase the overall profitability of a firm by freeing up fee-earner time and creating a consistent approach to all risk, compliance and legal matters. Businesses’ that have appointed a senior legal advisor are better placed to thrive in the ever-changing regulatory environment and new legal market. This article explores the evolution of the GC role and how hiring one could improve your firm.
How has the General Counsel evolved?
The burgeoning regulatory landscape has enlarged the remit of GCs considerably and as the role has expanded so too has their influence in an organisation. Senior legal practitioners no longer simply provide advice but have become trusted and prominent figures in financial institutions, often sitting on executive management boards guiding the strategic and commercial objectives of a firm.
Since the financial crisis, approximately 10% of Fortune 500 companies appoint a new top legal executive every year. In 2020, 44 lawyers were appointed to the General Counsel or Chief Legal Officer post and promisingly 23 of the newly appointed GCs were women and/or minorities — representing 53% of all appointments made over the year. In firms without a senior legal advisor, existing employees will commonly share the myriad responsibilities that the GC would usually oversee; including data protection, claims and complaints, conflict management and anti-money laundering controls.
As an organisation grows and matures, onboarding a dedicated person to guide these multifarious elements becomes more pressing. Particularly when a firm undergoes structural changes, such as mergers, which can throw up complex regulatory and legal issues. A GC has the capability to act at the intersection of a broad range of corporate activities and provide consistent oversight.
Today, GCs are required to combine their astute legal expertise with business acumen in order to create value for the company while managing risk successfully — with more and more experienced legal candidates willing to embrace the commercial aspect of the role.
What Does the General Counsel Role Entail?
The role of GC can vary considerably, depending on the size of the firm and their global outlook. In some organisations a senior legal advisor may only be responsible for legal risk, with a separate Head of Risk and Compliance taking responsibility for operational risk and regulatory concerns. In general, a GC is expected to help guide a business through times of change and protect the firm’s integrity — dynamically evolving alongside the activities and goals of a company.
Senior legal practitioners are further required to collaborate with professionals across an organisation. They are tasked with providing an objective view aligned with the firm’s perspective, or rather they should be a diplomat between competing views and operational needs. A GC should therefore have the ability to make sound judgements and evaluate options impartially. Additionally, they should demonstrate absolute integrity and have excellent communication skills, as they are usually responsible for positively influencing firm wide behaviour.
Executive legal practitioners often have a considerable amount of influence over the firm’s strategic and commercial goals. They are typically involved in senior-level discussions and help a company identify legal and risk issues in early plans. That said, not all GCs enjoy this level of involvement in the firm’s management, but as a company grows senior legal professionals should find themselves adopting a broader remit and subsequently gaining more influence.
How Can hHiring a General Counsel Improve Your Business and Profitability?
There is evidence that having a GC or a senior lawyer on the board can improve a company's financial performance and enhance corporate value. Appointing a GC should help free up fee-earner time and provide greater business efficiencies. Further, by promoting an open and transparent culture senior legal advisors often improve client care and satisfaction, while ensuring investor confidence.
In recent years, GCs have been transforming their legal teams to support organisations in new ways and introducing technology to streamline services. Although it is difficult to directly measure the impact of hiring a GC on profitability, their wide-ranging support of a team has been proven to help make vital cost savings and increase operational efficiency. Having a single person in a firm with overall responsibility for claims and litigation can help ensure an organisation takes a consistent approach, in turn reducing the risk of long-term legal costs or fines — with the appointment of GCs often reducing the number of claims and lowering PII premiums.
Further, installing a GC can give a firm a competitive advantage by demonstrating how seriously it treats legal, risk and compliance issues. Typically, a GC will be the main point of contact with clients within an organisation. Speaking with an experienced General Counsel can help clients feel more confident about how their information is being used and treated. Further, this process is usually quicker than contacting another employee that might have a vague knowledge of a certain area of concern — saving time and improving profitability.
The evolution of the role of GC and its expansion suggests that the function is here to stay. Senior legal practitioners continue to help financial institutions manage new and evolving risks with transparency, from geopolitics to cybersecurity. Most recently, many GCs were responsible for managing risks related to the COVID-19 crisis and being key advisors on formulating a firm’s response to protests against racial and social injustice. Further, they have become important contributors in rethinking how an organisation is managing diversity and inclusion agendas. As this article has demonstrated, appointing a GC can offer a multitude of benefits: improving the corporate culture of a firm, helping ensure investor confidence, mitigating risks and increasing overall profitability.
Tevia Kretzmer is a Consultant at Rutherford, the compliance recruitment and legal recruitment specialists.
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