Silvio Cavallo, general counsel at Pillarstone speaks to The Lawyer about the progress being made by GCs within organisations and the active role that leading lawyers will need to play to achieve sustainable decision-making. ESG considerations and stakeholder-orientated governance will be crucial themes in the years to come and legal teams will have to monitor and implement these business strategies.
How has the role of the general counsel evolved over the years in the private equity sector?
I think that the role of the GC has gone through a “Copernican revolution” over the past few decades. Where previously the legal team existed in a silo and would provide mere technical advice when required, now the general counsel is expected to actively contribute to business discussions and strategic decision-making and add value across the whole piece, from corporate governance to risk and crisis management. This transformation is common to all industries but appears even more radical and profound in the private equity sphere.
From a transaction perspective, the purview of the general counsel now strays outside mere structuring and execution and embraces the entire investment cycle, from fund-raising to exit; against such a broad canvas, private equity GCs operate at a variety of levels, including risk assessment and management, with an emphasis on downside protection.
Deal making, however, is just one of the pieces in the jigsaw: the role of a private equity GC includes steering the organisation through the uncertain waters of an increasingly complex regulatory landscape and being a key interlocutor to a variety of stakeholders in the corporate governance framework. Last, and crucially, the GC exercises the role as a guardian of the integrity of the organisation, which is simply vital in an industry built on reputation, trust and track record.
In your opinion, is the general counsel role now seen as a leadership role within businesses?
My inextricable lawyerly nature makes me wary of a generalization here, for leadership does not exist in a vacuum. I do believe, however, that it is increasingly expected of general counsel to exercise a leadership role within their organisation. There is a wealth of anecdotal evidence that bears this out.
First, a large number of general counsel are described as members of the senior leadership team within their organisation; looking, again, to the private equity industry, it is now increasingly common for the general counsel to be a partner in the firm.
Second, in a 2016 survey by the New York Stock Exchange, US corporate directors and CEOs indicated sound judgment, strategic perspective and problem-solving ability – all traits traditionally expected from someone within a leadership role – as the most valuable qualities that a general counsel ought to possess. Interestingly, legal expertise only ended up third in the list; yet another reminder that knowing your laws is not near enough to be a successful general counsel.
Last, and importantly, a few general counsel have recently been catapulted to the leadership role “par excellence” within an organisation: that as a CEO, which – just 30 years ago – would have been virtually unheard of and simply unthinkable.
What role can legal teams play in the long-term sustainability strategy of companies?
I am convinced that ESG considerations and stakeholder-oriented governance will be crucial themes for corporations worldwide in the years ahead for two key reasons. The first is the regulatory landscape: sustainability, transparency and long-term value creation are at the core of statutory, regulatory and guidance initiatives across the globe. The second is the market landscape: long term sustainability is being adopted as the new standard for investments by global asset managers (many of which have launched impact investing funds) and ESG risks are now recognised as a key factor in the allocation of capital. The Covid-19 pandemic is likely to act as a catalyst for such dynamics to further accelerate and consolidate.
The ramifications of this “new paradigm” will be manifold and will impact several areas within the precinct of the general counsel and the legal team. An obvious one is the company’s ESG strategy: the general counsel and the legal team should provide a meaningful contribution in shaping it and monitoring its implementation.
The one area that I believe will be more impacted, however, is corporate governance: a wider base of stakeholders will produce a multidimensional space populated by a variety of actors. General counsel should contribute to ensuring that the company has an healthy dialogue with various stakeholders and should play an active role in advising and supporting the board of directors in assessing and reconciling the interests of a wider panel of constituencies and achieving sustainable decision-making.
If you hadn’t become a lawyer, what would you have done instead?
When I was a child I was obsessed with the idea of becoming a professional football player to rescue my hometown derelict football team, Taranto F.C., and singlehandedly leading it to international success. Just a handful of experiences on the pitch with my friends, however, were enough for me to confront a harsh, but all too clear, reality: Taranto F.C. would not be counting on me to achieve immortal football glory. I hung up my boots and have ever since only been a loyal fan, cultivating a life of disappointment with arguably one of the most unsuccessful teams in the history of football!
Unrealistic dreams aside, if I had not become a lawyer, I would have pursued a career in philosophy. I am truly fascinated by the intellectual breadth of it and the fact that progress in philosophy is not a straight line: the fundamental questions that it grapples with today are broadly the same that were being asked several centuries BCE; likewise, the answers that philosophy attempts to provide rest on foundations erected in a distant past, but still relevant and important.
