The first quarter of 2023 is behind us. So, what is the mood of general counsel as they look ahead to the remainder of this year? Among those canvassed, it is one of caution, retrenchment and being tasked to do more with less.
This may be explained by the ever-broadening role of general counsel. They are now not only expected to be up to date with multiple areas of law, but also to successfully navigate interdepartmental priorities as well as offer strategic, business-critical advice.
Conversations with general counsel have revolved around four major focus areas of risk, as well as some key steps on the path to career advancement.
Increased Regulation and Enforcement
First and foremost, replies from general counsel interviewed across all industry sectors included the need to master environmental, social and corporate governance, including building the function and setting the agenda for ESG initiatives, with an eye toward avoiding or mitigating reputational risk.
Indeed, ESG regulations continue to move forward in efforts to drive organizations to provide high quality reporting and to reinforce a culture of greater public accountability.
Expected to come into effect in 2024, the EU Corporate Sustainability Reporting Directive will introduce more detailed reporting requirements for more companies.[1] This will have an impact on more than 50,000 companies in Europe, as well as companies based abroad that have a presence in the EU.
Second, privacy trailed closely behind ESG, particularly in health care, in view of the tension inherent in reusing patient data, recent Chinese laws on data sovereignty and concerns over overlapping legislation involving artificial intelligence and the EU European Healthcare Data Space.[2]
Also mentioned was the protection of intellectual property in light of looming competition law limitations on noncompete clauses in employment agreements, as well as compliance with economic sanctions triggered by the war in Ukraine. Simmering conflict with China also loomed large on general counsel's radars.
Cost Pressures
Leveraging technology has the power to increase efficiency and as one general counsel explained to me, "Every lawyer should include Legal Ops in their work." However, beyond legal tech, general counsel also must learn to master data such as metrics and key performance indicators, both within and outside the legal department.
This will enable general counsel to build a business case with senior management for more resources and receive due recognition for aligning the legal department with the business, demonstrating the general counsel's role as a team player in achieving business objectives in a timely fashion — this is even more important in an economic downturn.
War for Talent and Staff Retention Continues
However, the most interesting discussions with the general counsel canvassed involved keeping abreast of the market with careful salary benchmarking within the sector and future-proofing the legal department to acquire specific expertise, such as digital lawyering, operational privacy and ESG.
Additionally, the more enlightened of the respondents mentioned maintaining staff engagement with nonmonetary perks.
Crucially, these included career pathing and development opportunities, providing staff with a varied and challenging mix of work, recognizing and celebrating success, continuing education, often delivered by in-house centers of excellence, and allowing for a good work- life balance.
This might include the offer of hybrid working, flexible hours and mental health and wellness programs.
Compliance and Third-Party Risk
In-house compliance departments have historically ensured that their own employees were properly trained and monitored for their adherence to corporate codes of conduct, as well as anti-bribery and anti-corruption, and conflict of interest policies.
However, in view of their dependence on outsourcing corporate functions to varying degrees, many corporates have become vicariously liable for serious breaches committed by third-party vendors, giving rise to third-party compliance-risk functions.
Indeed, the risk of increased enforcement and fines remains to this day, making third-party risk experience a hot commodity in the compliance recruitment market. Many general counsel are consciously pushing for cross-functional collaboration, encouraging the convergence of various departments for joined-up risk management.
A good example of this is third-party risk in outsourcing and alliance management, which calls for end-to-end convergence from research and development to commercialization and supply chain.
These actions will be vital, as sanctions against Russia and China are expected to drive reshoring and other contingency plans.
Rebalancing the Legal Department
If general counsel are facing frozen headcounts and the aforementioned risks, they must rebalance their legal departments to take account of the pressures outlined.
The advent of contract management systems means that high-volume, lower-value commoditized work is either being outsourced to India or foisted back onto the business' legal team, who are trained in self-service from contract origination to archiving, providing key terms to remain sacrosanct.
This is not only freeing up existing capacity for strategic projects but also allows for key subject matter expertise to be sourced in-house, including in the areas of regulatory, employment and compliance.
Therefore, firms are ultimately looking to hire talented digital lawyers, privacy professionals who can operationalize privacy for the business, as well as compliance and regulatory experts.
However, ideally, the blend of experience sought by firms would include both geographical and functional expertise, such as regional experience in Northern Europe, plus market access, or experience in Southern Europe, plus antitrust and transactional experience.
Strategies for General Counsel Career Progression
Overall, these trends require general counsel to seek to expand their position to take on other functional roles and responsibilities, especially at smaller startups where the organization chart actively welcomes what some have coined as a "general counsel+."
This might include having experience and understanding in human resources, IT, business development, supply chain, regulatory, environmental, public affairs and even finance.
Assuming this role of general counsel+ could involve mastering financial fundamentals, understanding profits and losses and balance sheets, learning to manage, interpret and use data to demonstrate the mastery of their domain and develop subject matter expertise in a nonlegal field — regulatory, IT, corporate social responsibility and ESG.
General counsel should also be encouraged to gain nonexecutive director experience in an unrelated sector or charity as "the chassis may change, but the moving parts are similar," as one general counsel explained to me.
In short, general counsel need to free up bandwidth for themselves in order to be successful in their career progression and tame the multiheaded hydra we have described.
This will ultimately require general counsel to delegate to their teams and leverage their time wisely to anticipate and identify emerging industry challenges, provide solutions and develop contingency planning. Only then will they be able to affirmatively own overlapping risk and make it their own.
- [1] https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company- reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en.
- [2] https://ec.europa.eu/commission/presscorner/detail/en/QANDA_22_2712.
