Regulatory Uncertainty Brings Legal Chiefs Closer to Business
This article summarizes key points from a Corporate Counsel article published Nov 8, 2016 in my Global InHouse column. Political and regulatory uncertainty extends all over the world. Global corporate legal and compliance leaders must be alert. Case in point: Medtronic’s $17 million fine in China for a practice considered perfectly legal (in China and elsewhere) up to now.
Major governmental changes in the US, UK, Italy, and upcoming in France and Germany, as well as political shifts around the world, can quickly morph to aggressive enforcement and new regulation.
The silver lining: global uncertainty today is bringing many in-house lawyers closer to business strategy and planning.
Far More Volatile and Disruptive Issues Today That Present Legal Risks
Hendrik Bourgeois, Brussels-based Europe general counsel for General Electric, explains: "Far more volatile and disruptive geopolitical issues arise today than ever in my career. These issues merit the attention of global counsel leaders...We aim to be a few steps ahead."
Volvo Financial Services Global general counsel Alexia Maas, based in Greensboro, North Carolina, appreciates the opportunity to think ahead about implications. "We're expected to be business executives giving strategic advice, not only legal," she says.
As Maas explains, the legal team at Volvo Financial Services work alongside the business to identify risks and forecast potential outcomes.
Working With the Business to Identify Risks and Forecast Outcomes
One such issue is sustainability. In talking with a group of global corporate legal chiefs this fall, K&L Gates Washington, D.C., partner Daniel Crowley said, "The sustainability movement is now a permanent feature of corporate life and will continue to grow on both sides of the Atlantic."
"Sophisticated global counsel see a growing number of what SEC chair White describes as "social issues" affecting investor decisions and shareholder input, not to mention front-page news." Crowley suggests that staying alert to these developments can helps legal chiefs effectively advise their stakeholders.
While the government relations effort commonly falls within the legal function in American companies, this is less common in in-house functions elsewhere.
In-House Counsel Should Participate in Government Affairs
Regulatory risks and geopolitical shifts don't always fit into neat categories. General counsel Daragh Fagan based in England argues that in-house lawyers are well-suited to take the lead on regulatory work.
First in-house at Eni, then Thomson Reuters, and now Rentokil Initial, Fagan argues, "lawyers can (1) dispassionately assess a situation; (2) effectively evaluate and monitor developments; (3) be the calm voice in a crisis; 4) link their regulatory process knowledge to complex legal issues; and, perhaps most importantly, (5) offer a neutral perspective (as compared to business/commercial colleagues."
When it comes to uncertainty, Fagan and other in-house counsels’ top tip is to break down the potential impacts to the company. It’s then easier to prioritize and address ares where business interests could be threateened.
A Voice of Calm and Clarity
Bourgeois describes the proactive role GE takes (with regulatory affairs within Legal): "We have long-term aims.” His team (1) defines the key interests in each country; (2) assesses all forms of risk (e.g. economic or political risk); and when appropriate (3) advocate for change in that country."
Legal departments often turn to outside counsel in places where they don’t have capacity. According to Sally Shorthose, IP partner at Bird & Bird in London, "Our clients are counting on us.” First, to identify ways that others are effectively approaching current issues. Second, she says, “they want us to point out issues they may have missed. Perhaps most of all, they appreciate an external voice of calm and clarity, when so much is uncertain."