Nabarro report on general counsel’s influence finds little room at the top
21 June 2010 | By Andrew Pugh
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In-house lawyers will invariably claim to enjoy a great relationship with their commercial team.
And most will say they went in-house because they wanted closer involvement in decision-making at the very highest level.
A new report written by Nabarro partners Jonathan Warne and Peter Williamson, however, suggests that this is rarely the case and that lawyers’ involvement in key strategic decisions remains limited.
As its title, ’From In-house Lawyer to Business Counsel’, suggests, it focuses on the evolving role of general counsel and the need to prove their business value. A total of 81 in-house lawyers were interviewed from companies with legal teams ranging from 250 to one, along with 13 CEOs.
Lawyers were shown a ’value pyramid’ in which level one encompassed the most high-end strategic planning decisions and board influence, while level four involved providing everyday solutions to compliance and regulatory issues. Just 3 per cent of those interviewed considered themselves in the top tier.
This did not seem to hamper their aspirations, however: around a third of the lawyers said they expected to be involved in decisions at the highest level by 2015. It appears they have a long way to go.
One of the biggest challenges is overcoming the perception of being ’just a lawyer’.
There is little evidence that legal teams still need to justify their existence, but many feel they are seen as business blockers who lack leadership and management skills. They feel the traditional perception of lawyers holds them back, making it difficult to win the trust of senior stakeholders and the board.
While 38 per cent of the lawyers felt the in-house legal function made a very strong contribution to the commercial value of the company, only 14 per cent of the CEOs agreed.
Surprisingly, only 51 per cent of the in-housers felt it was very important for the legal function to add economic value, compared with 54 per cent of CEOs. Similarly, one in seven lawyers said adding commercial value was not important - a statement none of the CEOs interviewed agreed with.
How can those lawyers keen to work their way to the top make an impression? Some of the interviewees felt they could make major significant contributions in response to increasing regulation or through involvement in M&A or IPOs.
One feature to emerge from the report is that the role of the in-house lawyer remains varied, ranging from secretarial work and risk management to managing disputes and structuring deals issues.
General counsel at Nationwide Building Society Liz Kelly considers her team to be on the front line of decision-making within the company. “I want lawyers in our team to be seen as business advisers with their legal hats on, and not the other way around,” she says. “That creates a much better rapport with the business. But you still need to be mindful of the need for independence and not to become a ’yes’ person.
“You need to be clear about what your role is and to get involved in matters as soon as possible. You also need to be solution-focused. You shouldn’t say, ’No, you can’t do that’; it’s more about saying, ’Don’t do it that way, but think about this’.”
Kelly agrees that the role of in-house counsel has changed over time and that many lawyers are now on the front line of the business. She believes that building key relationships with people on the business side is crucial, particularly those willing to promote the value of the work of the legal team.
Chris Barnard, European general counsel at Coca-Cola, agrees that the in-house legal role has become more business-focused and questions whether the “natural conservatism and self-reliance” of lawyers is preparation for being a good manager.
“As a firm we work closely with GCs, so we’re obviously interested in the issues they face,” explains co-author Warne. “More and more businesses are taking on GCs and their role and influence is increasing, but we couldn’t find much about the economic value that GCs contribute to a business and this is something we were interested in asking the community about.”
Although just 3 per cent of the lawyers said they were involved at the highest echelons of decision-making, Warne insists that a lot of in-house lawyers, such as Barnard, do operate at the highest level.
“One area of focus is how to better communicate what the in-house function is doing for the business,” he adds. “It’s often not a case that these things aren’t being done, but an issue of perception.”
Williamson believes that general counsel are often victims of their own success. “They take on a lot of jobs – but again it’s an issue of showing what they contribute,” he says. “On the whole there’s a massive satisfaction with the role because of the proximity to the business side. People recognise the intrinsic importance of the legal function and I think it’s wrong to say there’s a big perception gap.”
The pair believe that, by introducing performance measurement, which only 32 per cent of those surveyed have in place, the legal function can align itself closely with wider business strategies.
The duties and aspirations may vary, but one thing seems certain: the role of the in-house lawyer is in flux.