GENERAL COUNSEL SURVEY - JETmerc.jet.ie/wp-content/uploads/2014/02/General-Counsel-Survey.pdf · General Counsel survey 7 1) In which ways has the role of General Counsel changed

GENERALCOUNSELSURVEYThe Evolv ingRole ofCorporateCounselin Ireland

General Counsel survey

GENERALCOUNSELSURVEYThe Evolv ingRole ofCorporateCounselin Ireland

General Counsel survey

Contents

Introduction and methodology

1) In which ways has the role of General Counsel changed in the past five years?

2) What is driving such change?

3) What are the MD’s top three expectationsfrom the corporate counsel?

4) What are the most pressing business issues?

5) What are the criteria by which externallawyers are selected?

6) By which metrics is performance measured?

7) Keeping informed about developing trends.

8) Should the General Counsel be a memberof the Board?

9) Should the roles of General Counsel andCompany Secretary be split?

10) Remuneration

11) Miscellaneous

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General Counsel survey 3

MERC Partners

MERC Partners, founded in 1980, is a marketleader in senior management and boardrecruitment, delivered through retainedexecutive search and advertised selectionservices.

Pioneers of executive search in Ireland, thefirm is proud of its blue-chip client portfolio,comprising many of the leading multinational,indigenous, semi-state and not-for-profitorganisations.The MERC Partners brand haslong been identified with integrity, discretion,expertise and successful delivery, enabling thefirm’s clients to gain a competitive edgethrough the quality of their seniormanagement teams.

MERC Partners is the Irish member of IICPartners, one of the world’s top ten executivesearch firms, which provides the combinationof one of the most recognised brands in Irishmanagement recruitment with the depth ofresearch, expertise and reach of a leadingglobal organisation.With over 50 officesworld-wide, our clients expect us to searchinternationally to identify and recruit the bestmanagement talent, regardless of whether thattalent is “on the market” or not.

Legal recruitment

MERC Partners’ legal practice is primarilyfocused on the recruitment of senior lawyersto work in-house in commerce and industry.Over the course of the past 28 years, we havedeveloped an unrivalled understanding ofwhat a business requires of its in-housecounsel, and what it takes for a lawyer tosucceed in such a varied and pressurised role.

Our legal recruitment practice is led bypartner Simon Waddington, a law graduatefrom the University of Sheffield, who alsostudied at the College of Law in Chester. Hisearly career was spent as a Legal Editor with apublishing company in London, before hemoved into legal recruitment in the City in theearly nineties. He joined MERC Partners in1995, and has been a partner since 1999.

He has extensive experience of recruiting awide variety of in-house counsel, fromlawyers taking their first step from privatepractice into industry, to highly seasonedEMEA General Counsel. Clients for whom hehas successfully recruited in-house counselspan most business sectors, to include financialservices, pharmaceutical, consulting, food anddrink, information technology (hardware andsoftware), telecommunications, regulatorybodies, semi-state and professional services.

INTRODUCTION

4 General Counsel survey

The evolv ing role of CorporateCounsel

The role of the corporate counsel in Irishbusiness has undergone dramatic change inrecent years. Once seen as simply the head ofthe internal legal department, whose primaryresponsibilities were to advise the company’smanagement, prepare and approvedocumentation, while acting as a cost-effective“company policeperson”, now the corporatecounsel is regarded as an integral part of thesenior management team.

General Counsel are proactive in providingguidance on commercial and ethical issues totheir CEO and Board, identifying andaddressing issues before they escalate.Theymust manage a range of stakeholderrelationships which can reach far beyond theboundaries of their client (the company) toinclude investors, the public, even government.

More than ever, the General Counsel mustunderstand the company’s overall business, inorder to identify and manage the multitude ofcommercial, legal, ethical, environmental,governance and compliance issues whichroutinely arrive at the General Counsel’s desk.He or she is expected to wear multiple hats,and is a figure of critical importance to theCEO, the senior management team and theBoard.

The recent era of corporate governancereform has led to an upsurge in advising andcounselling directors on their duties, while alsocontinuing to provide measured and objectivelegal guidance, in addition to making acontribution to the vision of the business.Management and leadership abilities count formuch.

MERC Partners ’ GeneralCounsel sur vey

In response to this transformation of the role,and the fact that there is now a core group ofGeneral Counsel which did not exist in depthin the Irish market until reasonably recently,we decided to undertake a survey to discusswith corporate counsel their perspective onhow their role has changed; what the businessnow expects from them; what pressures andchallenges particularly affect them; what theylook for from their external lawyers; and howthey should interplay with the Board.We alsolooked at other areas of relevance to GeneralCounsel, to include remuneration andreporting lines.

Criteria and Methodology

A group of 44 senior in-house lawyers wasidentified and invited to participate in thesurvey. Each participant has responsibility forthe strategic and operational management ofthe legal function for their organisation, andprovides guidance and support on legal andcommercial matters to the executive teamand / or Board.

Simon Waddington conducted a series of in-depth, face-to-face interviews of up to ninetyminutes’ duration with each participant.

Sur vey Populat ion

The status and ownership of the companies inwhich participants work are illustrated below:

Public

49%

Private

37%

Semi-state / public sector

14%

0% 20% 40% 60% 80% 100%


Representat ion by sector

Numbers employed byorganisat ions in which thepart ic ipat ing General Counselare employed:

2500+ 30%

10-100 12%

100-250 22%

250-1000 17% 1000-2500 19%

Financial services

22%

Telecommunications

9%

Information technology

17%

Engineering/construction

9%

Consumer goods

13%

Food and drink

13%

Other

17%

0% 20% 40% 60% 80% 100%

Prof i le of part ic ipat ing GeneralCounsel

Length of exper ience as in-housecounsel

Of the group which participated in the survey,the least experienced participant had workedfor one year as in-house counsel, and themost experienced had worked for 24 years insuch a position.

The average duration as an in-house lawyeracross the group surveyed is 10.6 years.

Repor ting lines

The diversity of organisations and sectorsconsidered is reflected in the variety ofreporting lines across the surveyed group.

The positions into which the General Counselreport are broken down as follows:

Repor ting teams

The average number of lawyers in the teamsreporting into the General Counsel group is4.04.

CEO / MD

52%

Global Head of Legal

13%

CFO / FD

13%

EMEA Head of Legal

9%

MD of EMEA region

5%

Company Secretary

4%

Board

4%

0% 20% 40% 60% 80% 100%



1) In which ways has the role ofGeneral Counsel changed inthe past f ive years?

All of those interviewed felt that the role ofGeneral Counsel in Irish business hasundergone dramatic change in recent years.

In many cases, the view was expressed that thetransformation of the function was a reflectionof how the General Counsel has become moreimportant to the business.The function is nowmuch more integrated into the decision-makingprocess. Management needs have become morechallenging, and more diverse. In some cases,there has also been a significant increase ofreliance from the Board: phrases used todescribe the relationship included “best friend tothe Board”;“trusted advisor”; and “strategiccounsellor”.

It is now the case that strategic input, planningand advice are inevitably sought at the inceptionof a deal or initiative, and the General Counselis expected to operate as a senior commercialmanager and business partner, as much as alegal expert.The old-style approach towards aGeneral Counsel as the company’s policepersonis now long gone -

those interviewed are expected to demonstratea focus on the provision of solutions.Theirsenior management colleagues expect them toexplain not why a course of action cannot betaken, but rather how an alternative course canfacilitate what they want to achieve.

At the same time, the business environment,both at home and internationally, has becomemore demanding, particularly from a regulatoryperspective.Those participants whosebusinesses have significant interests in the U.S. inparticular reported a marked increase inlitigiousness.A slew of high-profile falls fromgrace have fostered a keener understanding insenior executives that a failure in compliancecan have serious personal implications, whichhas led in turn to a greater reliance on theirGeneral Counsel.A greater emphasis on riskmanagement, to include the management ofpotential reputational risk to an organisation,was reported.There is also a greaterexpectation to run the legal department in amore responsive, smarter, more efficient, morecost effective fashion.At the same time, mostparticipants reported an increase in the volumeof transactions and subsequent workload.

More compliance, risk management and analysis of risk (to include reputational risk) 22%

Role now much more about commercial management, not purely legal 31%

Greater dependence on the final authority of the GC 2%

More significant focus on environmental issues and corporate social responsibility 4%

Greater involvement in strategic planning 8%

Much higher visibility and profile 2%

Greater expectation for transparency and integrity 2%

Greater requirement to protect against liability 5%

More international focus 2%

Requirement to understand political environment and lobbying 2%

Higher expectation for cost-effective, proactive focus on solutions 10%

More transactional work 4%

Greater emphasis on providing support to the Board 6%

2) What is dr iv ing such change?

The changes referred to are being driven byfactors in the external business environment,and also within the various organisations.

Changes in legislation and the emphasis placedon corporate governance in recent years haveplayed a significant part in driving the changesto the role of the General Counsel. Severalcommented that issues such as unlimitedliability and corporate manslaughter have“focused the minds” at the most senior levels,leading to a greater reliance on the guidanceof in-house counsel. Globalisation has beensignificant: those organisations which haveexpanded into new markets have inevitablyfound themselves facing a widening burden ofmulti-jurisdictional regulatory, commercial andcompetition issues. In addition, particularlywhere the General Counsel is operating in acompany with extensive international interests,an increased awareness of environmental andhuman rights issues has contributed.

Issues internal to the company which havebeen important include a stronger desire toavoid litigation, which can be so damaging tothe organisation’s reputation, and - in somecases - heightened shareholder expectation.The greater awareness at the level of thesenior management team to the legal threatsto the business has played a part.

It should be noted that several of thoseinterviewed felt that they had, at least in part,been personally responsible for driving thechange in how the General Counsel isregarded in their organisation, fuelled by adrive to make a significant, hands-on personalcontribution to the commercial managementof the business.


Increased litigiousness 6%

Focus on directors' liability - greater fear factor 11%

Increase in regulatory requirements 27%

Organisation has become more risk-averse 2%

Competition 6%

New developments in the sector 10%

Management of legal cost 13%

Globalisation 9%

Diversification 3%

Shareholder demands 10%

Environmental issues 3%




3) What are your MD’s topthree expectat ions from youas corporate counsel?

Unsurprisingly, the demands and expectationsof each participant’s MD varied considerably,based on the style of, and challenges facing,each MD. However, some common threadsemerged.

Technical and professional expertise wasassumed as “a given”. However, the manner ofdelivery of that expertise was seen asimportant: MDs expect their senior lawyers toprovide advice and guidance decisively,strategically and speedily, with an emphasis onhow a solution can be found to a problem.

Objective advice, which goes beyond the purelegal, is demanded, allied to the robustness andindependence needed to deliver what mightbe unpalatable news. A common responsewas that MDs want “no surprises”, along withthe ability to anticipate problems and to act as“an early warning system”.

Responsiveness was expected: MDs expect tobe able to reach their General Counsel 24hours a day, seven days a week.

There is an expectation that adequateresources are in place to manage legal issuesproperly as they arise, and that therelationship with external legal advisors, aswell as the in-house legal team, is beingmanaged in a cost-effective and efficientfashion.

MDs rely on their corporate counsel toensure that the business is compliant withlegislation and regulations, while alsocontributing to the broader business agenda.When an event or disaster occurs, theGeneral Counsel must move quickly toimplement damage limitation plans.

MDs expect successful outcomes - which canbe defined by a range of criteria, not justsimply “winning cases”. Successful execution isexpected in transactions, acquisitions, riskmanagement and contribution to thecompany.

Identify potential risk to the company: “no surprises!” 20%

Corporate governance 7%

Technical expertise and the ability to advise on wide breadth of topics 12%

Proactive delivery of solutions 15%To be on top of the regulatory environment 3%

Act as a trusted advisor and strategic business partner 19%

To not be dragged into the detail 5%

Cost effectiveness 10%

Effective completion of transactions 9%


4) What are the business issuesmost l ikely to keep youawake at night?

We were interested to understand whichissues prey most on the minds of the GeneralCounsel, as he/she juggles the diversedemands of their position.

Most reported wryly that they slept soundly,but again certain trends emerged across theparticipating group, reflecting pressures of abroader commercial, as well as legal, nature.

Issues included: threat to market share;competition issues; threat of a recession; themanagement and closure of major projects onan ongoing basis; fees charged by law firms;and managing a huge volume of work whensometimes under-resourced.

Liability exposure on major deals 5%

A potentially serious reputational risk issue 11%

Fees charged by law firms 4%

Volume of work and prioritisation 7%

Regulatory and compliance issues and keeping up to date 20%

Greater litigiousness 5%Competitiveness 9%

General commercial, rather than legal, pressures 16%

Responsibility of closing major transactions 11%

Accuracy of advice necessary for international deals 6%

Lack of resource / retaining resource 4%Economic downturn 2%

Regulatory and potentially high-profilereputational threats to the company arose asa particularly common theme, as did trying tokeep abreast of industry-specific and legislativedevelopments, both nationally and in otherjurisdictions.

Team management also featured: the desire toensure that team members were properlysupported, mentored and developed emergedas important.

Global reach was seen by some as absolutelycritical. Although many organisations requiredtheir law firms to be in the “Magic Circle”bracket, whether in Ireland, the U.K. or theU.S., others preferred the more personaltouch of certain niche or boutique practices.The provision of real expertise was theoverriding factor. In all cases, pragmatism,responsiveness and availability were simplyassumed.

Value for money is an issue: severalparticipants would be influenced by a lawfirm’s openness to the use of significantdiscounts, a cap on fees, or fixed feearrangements.


5) What are the cr iter ia bywhich external lawyers areselected?

The relationship with a particular person,rather than with a “big name” law firm, was ofcritical importance, based on quality of serviceand client care. Several partners werementioned by name as having an exceptionalgrasp of, and empathy with, the business inquestion, and this experienced understandingwas seen as absolutely critical.

The ability to provide genuine expertise inareas not covered by the in-house legal teamwas important, as was an expectation that theexternal lawyers would act with the team’sbest interests at heart, while acting as businesspartners. An understanding of the rules ofengagement and lines of accountability wasalso described as important.

Must be Magic Circle, in Dublin and internationally 7%

Quality of work: provision of accurate, pragmatic advice 11%

Empathy with the business, ability to partner and add value 17%

The relationship with the individual lawyer is key, not the firm 12%Responsiveness and availability,

focus on solutions 16%

Cost-effectiveness and flexibility on fees 12%

Referrals from trusted sources 2%

Ability to provide truly specialist expertise not available in-house 18%

Global reach 5%


6) By which metrics is yourperformance measured?

While some organisations have developedquite sophisticated systems to measure theperformance of their General Counsel andhis /her team against set business objectivesagreed in advance, in other cases performanceappraisal at this senior level is less formal andsomewhat ad hoc.

Cost savings and increased efficiency 14%

Reliance of senior team / Board on advice provided 5%

Execution of deals 13%

Avoidance of litigation 8%

Comprehensive client feedback 17%

Measurement against agreed annual performance plan 28%

Arbitrary assessment 15%

Criteria on which performance is measuredinclude the following: feedback frommanagement peer group, functional heads ofthe business and stakeholders; provision ofcommercial, rather than purely legal, advice;management of the legal function and itsinteraction with the broader business;effectiveness of mentoring and managementof the reporting team; cost savings andincreased efficiency; successful delivery ofprojects; “big wins” concerning transactionsand litigation; and compatibility with companyvalues.

The view was expressed on several occasionsthat it can be difficult to appraise performanceadequately at the level of the GeneralCounsel in a truly objective manner,particularly when the appraisal is being madeby a non-lawyer.




7) How do you keep informedabout developing trends?

One of the more pressing demands onGeneral Counsel is the requirement to keepthemselves fully up to speed on the myriad oflegal, regulatory and commercialdevelopments impacting their businesses, bothat home and internationally.The time availableto do so is limited.

There is therefore a reliance on proactive,value-adding advice from their external lawfirms, which regard its provision as a usefultool for deepening the client relationship.Mailings, webcasts and updates are regardedas highly valuable, as are conferences, seminarsand breakfast briefings, where workload allowsattendance.

Newsletters, circulars and updates from law firms 30%

Seminars and conferences 23%Internet 5%

Subscriptions to trade journals and periodicals 16%

Law Society Gazette 1%

CPD courses / personal studies 7%

Industry bodies 11%

Company monitoring system 7%

Other useful means of keeping abreastinclude: insights provided by membership ofcorporate counsel associations; briefings bythe Institute of Directors; legal and industry-specific publications and related onlineservices; updates from the Law Society,regulators and from the European Law FirmsAssociation; learning gained from continuousprofessional development; comprehensivecompany monitoring systems; the internet; andpersonal study.

8) Should the General Counselbe a member of the Board?

The question of whether the General Counselshould participate as a Board member splitthe participating group, as illustrated in thegraph below.

Those in the “yes camp” felt that membershipwas important, enabling visibility of all relevantissues coming over the horizon and likely toimpact the business.The argument was madethat presence on the Board would influencethe driving of a watertight ethical positionfrom the very top of an organisation.Those infavour did not feel that the corporate counselwould be necessarily conflicted, as there isalways the potential for conflict to arise as anexecutive of the business in any event.Thiswas seen as a management issue, not a legalissue.Where potential for conflict is identified,it was felt that seeking external counsel’sopinion would resolve the difficulty.

Those who argued against membership of theBoard felt that the lawyer’s fiduciary duties tothe company and its shareholders could beplaced in a position of conflict.The view wasexpressed by some contributors that, if not aBoard member, the General Counsel shouldnevertheless be a member of the executivecommittee. Some of the contributorscommented that they are somewhatperturbed by what they see as a definite trendtowards the General Counsel increasinglysitting on the Board.

Yes

39%

No

61%

0% 20% 40% 60% 80% 100%





9) Should the roles of GeneralCounsel and CompanySecretar y be spl i t?

Like the question of whether the GeneralCounsel should sit on the board, theparticipating group was split by this question,although it has to be said that the samestrength of feeling was not generated by theissue.

Those who felt that the roles should not beseparated felt that there was an obvious linkbetween the functions.The argument wasexpressed that the General Counsel was bestplaced to perform the role for compliance-related reasons, in the absence of a dedicatedCompany Secretary.

The main reason for splitting the roles, it wasargued, was based on volume of workload,and a general view that the fulfilment ofcompany secretarial duties was not aneffective use of the General Counsel’s time,particularly given ever-increasing corporategovernance responsibilities.

Yes

35%

No

52%

No strong view

13%

0% 20% 40% 60% 80% 100%


10) Remuneration

Remuneration packages varied significantlyamong the participating group, influenced bythe size, status and ownership of the companyin which each General Counsel works.Therange of cash remuneration (base salary andperformance-related bonus) is detailed below.Stock, options and other benefits have notbeen included.

Base salar y

Indicat ive bonus

0 - 10%

5%

10 - 25%

30%

25 - 50%

43%

50 - 75%

13%

75 - 100%

0%

100% +

9%

0% 20% 40% 60% 80% 100%

€100,000 - €150,000

39%

€150,000 - €200,000

26%

€200,000 - €250,000

4%

€250,000 +

31%

0% 20% 40% 60% 80% 100%


10) Miscel laneous

Through the course of the discussions, anumber of other topics arose, which did notfit comfortably under the preceding headings,but which were nonetheless regarded asimportant to the group which contributed tothis survey.

Of particular note were the following:

• Lawyers in industry lack a voice among thebroader profession: there is norepresentative body, no credible forum toexchange views and no tailored training.

• Some expressed a sense of professionalisolation: the view was expressed that theLaw Society does not provide support tothe in-house community.

• As in-house lawyers become moreintegrated into the businesses in which theyoperate, it is increasingly challenging to findany semblance of work / life balance.

• Positive influences are being brought to bearon the in-house legal community in Irelandby the influx of overseas-qualified lawyers.


Acknowledgement

MERC Partners would like to thank the GeneralCounsel group who took time from their busyschedules to participate in this survey. By sharingtheir personal and professional insights, they havecontributed to an area of knowledge which, inour view, has been under-researched in an Irishcontext.

General Counsel survey XX

11/12 Richview Office ParkClonskeaghDublin 14.

Telephone: 01 206 6700Email: [email protected]

www.merc.ie

Documents

GENERAL COUNSEL SURVEY - JETmerc.jet.ie/wp-content/uploads/2014/02/General-Counsel-Survey.pdf · General Counsel survey 7 1) In which ways has the role of General Counsel changed