Global General Counsel Survey – Beyond the Law 

In an increasingly challenging business environment General Counsel are being called upon to play a greater role in the running of companies, particularly in the early identification of, and management of risk.  With this context in mind, we were intrigued and excited to commission KPMG’s first Global General Counsel Survey. We wanted to discover how General council in major businesses, operating across industry sectors and geographical regions, are developing into business decision-makers, to gauge the progress they have made so far, and to understand their greatest challenges.  We were also keen to explore what General council require from their organisations to allow them to make this transition from pure legal adviser to forecaster and strategic adviser.   

320 General Counsel from 32 countries participated in the survey, making this the most comprehensive survey of its kind.  We have found that by using their unique skills and approach to business the influence of General Counsel in the C-Suite is growing, but the journey is far from over and that there is a gap between the benefits General Counsel can bring and their actual involvement in strategic decision making.  Governance, processes and attitudes will need to change on all sides to allow businesses to reap the benefits that can come from having General counsel who can be a barometer for the board.

So let’s take a look at the key findings.

According to the survey around two thirds of General Counsel are now more involved in the business strategy than they were five years ago, a very significant move forwards. However, there is clearly still some way to go because 80% of General Counsel believes their involvement can reduce the number of disputes and regulatory issues their companies face. In mature markets both figures are higher, reflecting the difficult environment of the last 5 years and perhaps a more traditional, purely legal General Counsel role in the high growth markets. This however is beginning to change.

One way of influencing business decisions is to have a seat at the table with the decision makers, but only about 40% of the global respondents said that they sit on the board while another 40% or so report directly to the board. Where General Counsel have succeeded in gaining a high level of influence they are likely to be working very closely with the business, to be giving commercial as much as legal advice and to be forward looking. With a deep understanding of the business, General Counsel can leverage their different skills and perspective to add significant value.

One area where General Counsel can be influential is in terms of the management of risk.  About 60% of respondents think that the business environment is more risky now that it was 5 years ago. Mature markets were seen as particularly risky with General Counsel from high growth markets being more relaxed. This probably reflects the different impact of the global financial crisis. However, there was one area of risk that General Counsel around the globe agreed on and that is regulation.

We found that General Counsel see the increasing volume and complexity of regulation as the biggest risk facing their organisations over the next 5 years. Nearly half of all respondents said this is a concern. In terms of the types of regulation they were most worried about, over a third of respondents cite competition and anti-trust, consumer protection and anti-bribery and corruption regulations and these were closely followed by financial regulation, data protection and security regulation which were mentioned by a quarter of interviewees.

These concerns were shared across the globe and not surprisingly regulatory compliance was the top area of work for the majority of General Counsel.  Interestingly in mature markets regulatory disputes are widely expected to increase but regulatory investigations much less so.  In high growth markets it’s the other way around. In these markets there is much less appetite for testing regulators in the courts but an expectation that enforcement will be tougher in future.

Anticipating changes in the regulatory landscape, putting complex legal issues in the commercial context that business leaders can relate to, and working with colleagues across the organisation, will enhance the influence of the General Counsel.  But only around a third of respondents globally included proactively identifying risks at an early stage as one of their top three tasks. North American respondents gave this a much higher priority saying that it was a key step in risk management.  We agree.

The management of disputes is the second top area of work for General Council around the globe.  While General Council expect the number of disputes to increase over the next 5 years, their biggest concern is the increasing complexity these disputes will bring together with the increasing volume of information that will have to be disclosed.  Two thirds of respondents stated these as the top risks).  The types of disputes that were expected to increase were regulatory disputes (59 percent), competition/anti-trust (52 percent) and employment related disputes (46 percent). 

Without a change in approach, these trends are likely to mean slower and more expensive resolution of disputes.  The survey results showed no single means of dispute resolution is preferred over the other.  The number of respondents expecting increases in the use litigation, arbitration and mediation over the next 5 years is relatively uniform.  Our research found that General Council are much more intent on seeking ways to avoid disputes altogether or to resolve them before they reach the stage where lengthy and costly litigation becomes inevitable.  Partly this is being addressed through greater involvement in the way contracts are managed once they have been signed, but where disputes cannot be avoided, General council are looking at alternative means of dispute resolution to minimise costs, disruption, and damage to business relationships.  This can mean turning to mediation or less formal negotiation processes. 

As David mentioned earlier, 79 percent of General Council consider that their being involved in the commercial decision making process helps their organisation reduce the number of disputes it faces.  Seeking external advice on avoidance of and early resolution of disputes is seen by almost half of respondents as another key mechanism to reduce the level of disputes. 

In order to minimise the cost and disruption on of disputes General Council are increasingly working alongside their commercial colleagues after contracts are signed, to help them identify potential legal pitfalls and manage disagreements more effectively. A ‘light touch’ seems to be most effective but the complexity of contracts and business relationships means that circumstances can change quickly and General Council need to be proactive in helping to nip any potential disputes in the bud.

In conclusion the growing demands from regulation and the need to avoid disputes to preserve key business relationships will lead Boards and senior executives to rely increasingly on their in-house legal teams for pro-active advice.  The most effective General Council will be those who can predict potential problems, explain the risks and weight them against the opportunities, blending business and legal knowledge.  Global businesses face global challenges and the organisations that fare best will those who can turn adversity to their advantage.  General council are well positioned to help navigate the wisest course.