Trends in the Office of the General Counsel
On February 20th, we attended a panel discussion featuring a talented cohort of Silicon Valley General Counsel, hosted by Goodwin Proctor’s Redwood City office. The diverse panel featured John Schultz (GC/HP Enterprise), Wanji Walcott (GC/PayPal), John Kuo (GC/Varian Medical Systems), and Hannah Gordon (GC/San Francisco 49ers). Brackett Denniston, Goodwin Senior Counsel and former Senior Vice President and General Counsel of General Electric, moderated.
The discussion was wide ranging and offered a good deal of insight into the mind of today’s General Counsel with a focus on the most pressing issues they face on the job. Each of the panelists provided candid, thoughtful responses to questions nearly all General Counsel and their executive colleagues wrestle with. Mixed with good humor and serious reflection, this was one of the most insightful panel discussions we’ve heard in quite a while.
What follows is a distillation of the panelist’s thoughts, without attribution, and a little color commentary on what we’re hearing from our clients who are managing an ever-evolving legal landscape.
What are the biggest risks you face and what are you doing to address those risks?
The number one risk the panelists highlighted is talent. To nobody’s surprise, organizations of all sizes are struggling to attract, develop, and engage lawyers (and other professionals). The issue of attracting and retaining talented lawyers has grown increasingly difficult as the economy continues to drive demand for experienced counsel across a broad spectrum of business types and legal subject matter. The challenges of recruiting, engaging, and retaining qualified lawyers in today’s market are real and they are acutely felt by even the highest of high-flying organizations.
While the regulatory landscape varies from industry to industry, nearly all companies today are experiencing change in their respective landscapes. And those landscapes are becoming more complex. If you are leading the legal function of an organization that conducts business overseas, that complexity is compounded. When you layer on consumer data privacy protections, the business and regulatory risks magnify. Clearly articulated policy and internal monitoring of employee and customer behavior are the first lines of defense in risk mitigation.
Technology and Innovation
The risk of losing market share to an innovative competitor seems obvious to most people who have been around the Valley for a while. What isn’t so obvious is the risk created by not allowing for internal innovation and disruption. Holding fast to “our way” leaves the door open for those outside your business who are looking for any opportunity to innovate around you. And internal team members who are kept from creative exploration will leave for greener pastures.
Businesses that get stuck in the here and now get left behind. And that is true for lawyers. The best GCs and their in-house legal teams are finding new ways to leverage technology and emerging best practices to get closer to their business partners, anticipating their needs, and empowering their clients to confidently meet the challenges in front of them.
The Economy/Consumer Sentiment
Few companies are insulated from the ups and downs of the markets or the shifting sentiment of their customers. Staying ahead of the demand curve is a challenge and an imperative for all businesses. Savvy GCs are with their business colleagues, offering strategic advice on how best to navigate the big shifts in both the economy and in consumer demand for their products.
How would you describe your relationship with your CEO and your Board of Directors?
Building Trust is Key
Without exception, the GCs on the panel spoke to the importance of building relationships of trust with their CEOs and their boards of directors. How do they do it? By being respectful, by pushing back when the matter calls for it, by digging in and doing the hard work of learning as much about the business as possible, and by regularly taking off their lawyer hat and thinking like a business person. Above all, a GC must be honest with their colleagues and the board. Being trusted is the predicate of any GC’s success in the role.
One of the panelists distilled the issue to this: “You have to be true to yourself and your integrity must be beyond reproach!”
The more a GC communicates with their CEO and other members of an executive team, the better their relationships are with their clients. Maintaining a feedback loop that is endlessly open is critically important to the success of these relationships. Each of the panelists reinforced this message while acknowledging that it isn’t always easy, but it is always right to be upfront and forthcoming with information. No CEO or Board Chair likes to be surprised. Few CEOs like to be kept at arm’s length by their General Counsel.
A GC must have their own channels to the board of directors. The board must know that the company’s GC is an honest broker who can be trusted in every instance. The role requires a degree of neutrality when navigating between the board and the CEO, but that is not to suggest the GC must always act as a referee. Still, as one of the panelists noted, it can be a little lonely at the top of the legal organization. After all, a GC’s duty does not run to a product group or a business unit or a noisy executive.
It is axiomatic that a GC’s success or failure is a direct result of their ability to build and maintain relationships with their CEOs and boards. But there is a built-in tension between the need to work well with executive colleagues and the ethical responsibilities in-house counsel have to protect the corporate entity – the REAL client – whatever the pressures to support the humans operating the business.
What is your approach to Crisis Management?
If you are the GC of just about any organization, you can and should anticipate facing a crisis at some point down the line. Some crises are predictable: bad employee behavior, an external data breach, a whistle blower, an accident. Any number of things can and will go wrong and the more you do to prepare for the inevitability of a crisis, the better you’ll be at getting on top of it when it occurs.
A GC’s communications with their CEO and board is key in a crisis. Information must be shared as soon as possible so that all the stakeholders have as much information as possible to guide them in their decision-making processes. There is nothing to be gained, and much to be lost, by sitting on critical information. A GC must get in front of the client as quickly as they’re able so that the business can get out in front of the storm. If they do not, they will lose trust. Nobody likes a surprise.
Each of the panelists emphasized the importance of bringing on experts as quickly as possible including outside counsel, industry experts, a PR firm, and any internal resources who might have expertise you can leverage in the company’s early response to a crisis. As GC, you cannot know everything about every major obstacle your clients might face, but you can build your list of go-to expertise when you hit a wall. Let go of any expectation of being the singular source of information in the midst of crisis. You owe it to your client to call in the cavalry when a major issue requires it.
Own the Narrative
Our 24/7 news cycle makes getting out in front of a crisis incredibly difficult. The GC and the rest of the crisis response team needs to act fast to own the narrative, even before you have all the information you think you need. That creates a real tension between the need to gather information and the need to drive the narrative. But as one of the panelists noted: “’No comment’ is the wrong answer when dealing with the press.”
As the GC, you are looked to as not just the point person, but the person who brings calm into the room, “the person who rises above the fray,” as one of the panelists put it. Your CEO and executive colleagues will lose trust and confidence in you if you are unable to calmly walk them through the issues and the options available to the business. That doesn’t mean you dither or meditate. But stepping back from the rush of emotion will bring far more to the response effort than any theatrics. One sage member of the panel acknowledged the challenge of a perceived delay in acting. But taking a couple of hours to gather your wits will pay dividends when you and your executive team finally sit down to hammer out a strategy for whatever is hitting the fan.
How do you select and manage outside counsel?
Growth of In-House Teams
The trend of pulling more work in-house continues as GCs of companies of nearly every size are asked to do more internally. That is particularly true of standard commercial transactional work. The panelist with the smallest in-house team made it clear it was the role of the in-house lawyers, even with a team of two, to do the transactional work, farming none of it out unless the deal is particularly complex or requires specific subject matter expertise. This is consistent with every conversation we have had with our CEO and GC clients over the past few years and we see no sign of the trend coming to an end.
Leveraging Subject-Matter Expertise
Each of the panelists spoke to their use of outside counsel on highly impactful matters. These are the matters where an outside expert can bring a diverse perspective that adds significant value. Value that fills a gap in the organization’s in-house capabilities. But here again, one panelist made it clear that their team looks for outside counsel who possess the ability to understand the internal dynamics of the organization putting them, and their clients, in a better position to succeed whatever the stakes. As another put it, “Outside counsel’s job is to make me look good!” The days of the showboating, high powered Partner riding in to set everyone straight are long gone. GCs hold the keys to access and the outside attorneys who do not get that do not get the work.
However valuable outside counsel expertise may be, “the budget is the budget,” as one of the panelists put it. The dollars are finite, even in a crisis, and the budget has to balance no matter what. At a time when GCs are under pressure to deliver more for less, outside counsel who do not get it don’t get the business. In other words, no matter how good an outside attorney or firm might be, if they aren’t able to stay on top of the dollars on behalf of their budget constrained clients, they’re out. As another panelist noted, predictability on legal spend is important, particularly for smaller organizations. Outside counsel has a responsibility to work with their clients to build a relationship with resources in mind.
Diversity & Inclusion
It comes as no surprise that Diversity & Inclusion came up in the context of selecting outside counsel. Each of the GCs on the panel made it clear they care about the diversity of the outside teams working on their matters. Diversity is important and GCs are leading the charge with outside counsel to diversify the ranks of Associates and Partners assigned to do the actual lawyering. When you layer on international growth and a company’s global footprint, diverse attorney perspectives become even more important. Firms that use diverse attorneys for pitches but then fail to put those diverse attorneys to work on client matters don’t get more work. At least that is the current party line.
Because D&I was but one bullet point in a broader conversation about selecting outside counsel, the panelists didn’t have time to talk about what they and their in-house colleagues are doing to help their outside firms attract and retain diverse lawyers. This is a particularly thorny issue given the dearth of diverse Associates and Partners joining, and remaining in, the biggest full-service law firms.
How do you stay ahead of the issues? What are you reading?
Business moves at a blistering pace and that pace is accelerating. The savvy GC will put in the time necessary to know and understand what is changing around them – in legal practice, in the business ecosystem in which their organization operates, and in the regulatory landscape.
Understand Your Business
While not exactly revelatory, the panelists noted the importance of digging into the business deeply to understand what the business is actually doing and where it wants to go. As one GC put it, “You need to make sure you’re in the right meetings.” Do you understand your company’s business strategy? Can you see or anticipate the risks that strategy poses? If a GC isn’t interested in taking their seat at the table, they are of little use to the business they have been hired to serve.
Pay Attention to Policy Changes
For the highly regulated industry, change usually creates complexity and increases an organization’s risk profile. One of the panelists suggested that because policy changes precede regulatory changes, it is important to be involved in industry groups. Doing so ensures that the organization is represented in policy discussions early on. Early insight helps a GC anticipate the effects on the business of a possible change in regulatory regimes. It also helps them plan and manage their resources to meet whatever the challenges of new or different regulations might bring.
Newsletters and News Sources
To the delight of outside counsel everywhere, GCs read and rely on law firm alerts and bulletins. Updates in case law and regulatory change are well received by most GCs who have precious little time for leisure reading. So, if you are a law firm Partner or practice head who wonders if anyone’s reading the stuff your firm is putting out there, worry not. Those bulletins draw attention. Of course, GCs read the Wall Street Journal and various non-legal news sources as well.
It seems the story of Theronos’ meteoric rise and catastrophic failure has captured just about everyone’s attention. It is a stunning story of bad corporate behavior and, as one of the panelists suggested, “should be GC reading 101.” Even for the very busy GC who can’t (or won’t) take time for leisure reading, Bad Blood was a must-read. If you’ve been living under a rock and aren’t familiar with the Theranos story, this overview is a great place to start.
The reference to John Carreyrou’s best seller made all the sense in the world given this engaged group of panelists and their insightful comments on the role they play as leaders, as lawyers, and as corporate citizens. It reinforces their frequent statements on the importance of honesty, integrity, and courage – hallmark characteristics of great GCs everywhere.
What we heard from this engaging GC panel resonates with our experience counseling clients on how to assess their need for legal talent and what they should reasonably expect of their General Counsel. As attorney search consultants, we speak regularly with CEOs, CHROs, and other business executives who are looking for strong leadership in the GC/CLO suite. How strength in leadership is defined varies from organization to organization, but there are a few critical characteristics of the modern GC universally valued by executives in organizations of all types and sizes:
Curiosity and a genuine interest in the business
Strong ethical sensibility
Crystal clear communication style
The role of GC has evolved significantly over the last couple of decades as executive teams and boards look to their top lawyer for more than just legal advice on the most obvious risks to their businesses. Today's GC must be prepared to tackle operationally significant functions, lead strategic initiatives, and build multi-disciplinary teams. We assess a GC's readiness to lead by digging deeply into their experience, listening to their war stories, and challenging them on their platitudes.