I was recently invited by the ABA to address a group of General Counsel on “Lawyers as Guardians of Business Integrity and Conscience of the Company.” The topic was chosen because of a spate of high-profile scandals and regulatory imbroglios that resulted in no small part from the failure of GC’s to discharge the guardian/conscience role.
General counsel—and large corporate departments– are law’s petri dish. They are reconfiguring the boundaries and expanding the expectations of what it means to be an effective corporate lawyer. Ben Heineman, Jr., an in-house pioneer who helped redefine the GC role—and corporate legal departments– during his years at General Electric, remarked that GC’s play ‘offense and defense. He was referring to their dual, often-conflicting roles as enterprise defenders and business partners. Successful negotiation of the two demands superior judgment, persuasion, integrity, and chutzpah—all hallmarks of great lawyers.
From Roadie to Rock Star: What a Long, Strange Trip It’s Been for GC’s
As recently as the 1990’s the General counsel was the lawyer equivalent of roadie to the law firm partner rock star. The GC fraternity—and it was a men’s club—was populated by large firm alumni whose in-house role included overseeing work sourced to law firms. Most of the heavy-lifting was done by firms, and a good chunk of it often went to the GC’s former firm. General counsel also attended Board meetings and commonly oversaw regulatory compliance. U.S. Senator Chuck Grassley excoriated Tenet Healthcare’s GC for this: “Apparently, neither Tenet (nor its General Counsel) saw any conflict in her wearing two hats as Tenet’s General Counsel and Chief Compliance Officer…It doesn’t take a pig farmer from Iowa to smell the stench of conflict in that arrangement.”
A Trinity of powerful macroeconomic forces—globalization, technology, and the global financial crisis changed the way corporations conduct business and accelerated the metamorphosis of the GC role into what it is today. Corporate legal departments, long the largest consumers of legal services, are now its biggest providers. This seismic shift in market share was initially regarded as labor arbitrage. In fact, the migration of work from firms to corporate departments and service providers was the initial phase of a paradigmatic shift that has recast how and by whom legal services are provided. The law firm partnership structure, built on input—hours and origination– yielded to the corporate delivery structure of in-house departments and providers built on output—performance and results. General counsel no longer regarded firms as the default provider and migrated more and increasingly complex work in-house and/or to “corporatized” service providers that leverage technology and process to reduce cost, mitigate risk, compress delivery cycles, create “big data,” and routinize tasks.
Law firms deployed a ‘brute force’ delivery structure, assigning phalanxes of generalists to address ‘legal issues.’ In the new paradigm, tech and process enabled corporate legal departments and service providers deploy legal specialists, supported by lower-cost resources, to respond to business challenges. GC’s are at the epicenter of this change, operating at the intersection of law, business, and technology. Leading corporate departments and service providers—unlike traditional partnership-model law firms—are not lawyer-centric. Lawyers work side-by-side with other professionals—technologists, process/project management experts, and others. ‘Legal operations’—a holistic approach to the delivery of legal services and the business of law, has emerged as a powerful industry force and an integral component of corporate legal departments. GC’s provide oversight not only for the practice of law but also the delivery of legal service. In large departments, the delivery function is often led by the Chief Operations Officer (COO’s a/k/a ‘legal ops’ who works closely with the General counsel.
The GC Portfolio: Complex, Diverse, and Novel
Today’s GC’s have diverse portfolios that include: primary responsibility for an expanding percentage of the enterprise’s legal work; overseeing the practice and business elements of legal delivery; managing a legal supply chain (internal and external); participating as business partners with the senior corporate management team; balancing the corporate guardian function with advancing enterprise objectives; mitigating and responding to various enterprise risks including cyber-security, crisis management, social-media oversight, compliance, brand protection and other existential threats; and aligning the legal department with the enterprise and beyond. No wonder GC’s are well-paid, highly regarded professionally, and the focus of so much attention.
Both the ‘defensive’ and ‘offensive’ GC roles are nuanced and multi-dimensional. For example, ‘playing defense’ means not only responding to problems but also averting them; GC’s must be proactive and reactive. They are tasked with identifying and deploying meaningful metrics, data analytics, and predictive tools to promote early detection of potential risks. GC’s are also charged with adapting benchmarks that measure results, efficiency, spend, and other legal delivery components. GC’s are also on the front line of process improvement to routinize tasks, capture institutional knowledge, and integrate the legal department with other silos within the enterprise. GC’s are collaborators, integrators, and business advocates; they are not just lawyers anymore. Their performance is measured not only internally but also by how effectively they advance enterprise objectives (‘play offense’).
The defender role is especially challenging because business has become larger, more complex, multinational, and multicultural. GC’s oversee many different business units, geographies, regulatory schemes, practice areas, technologies, compliance rules, and supply chains that often conflict with one another. To be a good defender, the GC must know the business (and its multiple units) as well as understand the personalities charged with managing them. This requires intellect, people skills, and the ability to use persuasion as a tool for reaching consensus within the parameters of legal and ethical conduct.
The GC must lead by example, encouraging the legal team to be collaborative, understand how technology affects legal practice and delivery (many State Bars require this as an element of professional competency), and appreciate that legal practice and legal delivery are related but distinct. These skills are not taught at law school or learned at large firms. So how does one acquire them with all the immediate fires that must be put out? The simple answer is that many of the new skills must be learned on-the-fly, online, in executive training courses, and from experts and thought leaders.
Cost and Conscience
No consideration of the GC role would be complete without mention of cost and the pressure to ‘do more with less.’ GC’s manage a large, geographically-dispersed, full-service legal practice. They are under enormous pressure from the C-suite to rein in legal spend when demand for legal services is increasing. They are also accountable for results and protecting the corporate brand. Here’s where their dual role as business operator of legal delivery comes in. GC’s must be equally adroit managing the practice and delivery of legal services. Here’s where the challenge and opportunity intersects. To achieve more with less, GC’s must reimagine how to marshal and allocate resources—internal, external, and hybrid—to achieve optimal results, mitigate risk, and contain cost. This is a worthwhile initiative, one best undertaken with few– if any– preconceived notions of outcome or past practice.
Conscience is also an important component of the GC role. Championing diversity, encouraging the enterprise to act ethically and responsibly, adherence to the law and high ethical standards, devoting resources to pro bono activities, ‘re-educating’ the corporate legal team, and defending democracy and the institutions supporting it are all important aspects of the General counsel’s role as the standard bearer for the corporate conscience. The GC must lead by example, serving as a pillar of strength, fairness, and credibility within the department, the enterprise, the community and beyond. The GC should exchange best practices and “lessons learned” with peers at other companies. GC’s should be active members of the legal/business ecosystem, providing thought leadership and ‘giving back’ to the broader legal community. Forging partnerships with law schools and young lawyers, ameliorating the access to justice crisis, and defending the rule of law are three of many ‘conscience areas.’
General counsel are the bellwethers of the legal profession. They are part lawyer/business operator/data analyst/process/project manager/ethicist/supply chain manager/therapist/entrepreneur/and pioneer. The entire legal ecosystem should closely monitor the GC role as it casts a light on the roles, skillsets, demands, and opportunities lawyers will confront in the new marketplace.