The new legal eagles

In-house counsel step out of the back office and into the boardroom

In-house counsel step out of the back office and into the boardroom
By Tequia Burt
Chicago Lawyer correspondent

In the not so distant past, general counsels were thought of as strictly the “company lawyer,” largely responsible for litigation and doling out reactive legal advice. But in today’s ever more complex and sophisticated regulatory, technological, global and social landscapes, corporate legal leaders, including chief legal officers and general counsel, have leveraged their skills beyond the legal department into the C-suite and boardroom.

“The general counsel today versus the general counsel of 20 years ago is very, very different,” said Alan Tse, global general counsel and corporate secretary at Chicago Fortune 500 commercial real estate services company Jones Lang LaSalle, who serves on the board of the Association for Corporate Counsel.

“Now, we’re called upon to be business strategists and to be the gatekeeper of ethics. To lead compliance for the company, to lead, for the most part, a legal department as well as be part of the executive management team,” he said.

According the Association for Corporate Counsel’s annual 2019 survey of more than 1,600 legal leaders across the globe, chief legal officers and general counsels have more power than ever in their companies, finding that 93% of Fortune 500 chief legal officers report directly to the CEO.

In addition, almost 70% of chief legal officers indicated that the executive team seeks out their advice for business decisions, up 11 percentage points from last year. That means that general counsels are increasingly seen as top-level decision-makers charged not just with protecting the company from legal disaster but also for growing its business and leading its strategic direction.

“When my CEO looks over to me in a meeting and asks, ‘What do you think we should do?’ often that’s not asking me to make just a strictly legal analysis,” said Shelbie Luna, general counsel and vice president of administration at Bickerdike Redevelopment Corp., a nonprofit community development corporation concentrating its current efforts on Chicago’s Northwest Side.

“They are coming to me to make a pragmatic business decision. That decision-making certainly takes into account my legal knowledge, but also what I know that we’re trying to accomplish for the business — a means to an end,” she said.

Melvin Williams Jr., chief legal officer at Chicago Trading Co., stressed it’s of tantamount importance that today’s legal leaders really understand the ins and outs of their company’s business to be able to advise strategic direction.

“Sure, I’m giving legal advice all the time, but I’m also seeing, more and more, that I’m giving judgment advice when the issue isn’t so much a legal concern as much as a strategic business concern,” he said.

“And the better a lawyer understands the business, the better position they are in to advise the business, not just on the legal issues, but also beyond. Even though the law says you can do something doesn’t mean it’s in the best interest of the company’s business. What are the economic and reputational repercussions? What are the consequences?” he said.

A whole new world

The Association for Corporate Counsel report cited that much of this shift is occurring due to the rapid pace of change in the geopolitical and business environment.

“Most general counsel wear several hats but the most important one is to ensure the legal health of the client — that hasn’t changed. What has changed is the complexity of the environment and the pace of decision-making,” said John L. Howard, senior vice president and general counsel at W.W. Grainger, a Fortune 500 industrial supply company based in north suburban Lake Forest.

Nowhere is this exemplified more than at Deerfield-based Fortune 500 pharmacy retailer Walgreens Boots Alliance legal department, led by Senior Vice President and General Counsel Elena Krause.

The retail world has been turned topsy-turvy in recent years as more traditional retailers like Walgreens increasingly compete online with the likes of Amazon as well as with CVS and Walmart. Now Krause’s department is tasked with helping to lead the business strategically as it seeks out new ways to differentiate itself from its rivals.

“As the retail environment continues to change and evolve, we are confronted with new business challenges,” Krause said. “While risk assessment and mitigation are still important elements of the general counsel role and the legal function as a whole, we are now viewed more as business advisers and partners,” she said.

“I would attribute this in part to the [legal] team truly understanding how the business operates and continuing to demonstrate how our perspective helps the business realize value in our day-to-day operations, new product offerings and partnerships with other businesses,” she said.

Earlier this year, the retailer said it would aggressively pursue its partnership strategy, boost e-commerce offerings and redesign stores as destination shops for customers’ wellness needs to better compete in an increasingly digital environment.

Krause said the change in the commercial landscape brings new challenges and opportunities for her team on how to best advise the company and partner with the business.

“The ongoing digital transformation in our society has changed the way businesses work and how customers expect to interact with retailers such as Walgreens,” Krause said.

“As our business clients innovate to continue to meet customers on their terms through technologies such as tele-health and our mobile app, we as legal counsel are challenged to keep abreast of the changes in the law and to anticipate and help avoid the bumps in the road — be they regulatory or commercial considerations,” she said.

Tech disruptors

Walgreens is not the only company that is affected by technological innovation. The development of disruptive technology like Google’s self-driving cars, assembly line robots, artificial intelligence, wearables and on-demand services such as Uber, are poised to transform how businesses across the spectrum — transportation, retail, manufacturing, transportation, etc. — operate. And with that shift comes increased responsibility and visibility for general counsels.

“Perhaps the most pressing issue today is how to address technology, both as it can enable new business processes and as it can disrupt business models,” W.W. Grainger’s Howard said. “Added to that is the rapid emergence of technology collecting and analyzing data. And this is all before you think about the challenges of managing a legal department — there is no standing still,” he said.

Indeed, according to the Association for Corporate Counsel’s study, disruptive technology, along with brand reputation management and regulation, is one of the most important issues facing corporate legal leaders today.

New regulations like General Data Protection Regulation, which is at the core of Europe’s digital privacy legislation, governing data sharing and storage led almost 70% of respondents to say they were concerned about data breaches and the protection of corporate data.

The European regulation was designed to give European Union citizens more control over their personal data and aims to simplify the regulatory environment for business. Under the regulation, companies are charged with ensuring that consumer data is gathered legally and under strict conditions; data collectors and managers are also responsible for protecting that data from misuse and theft.

In January, the Illinois Supreme Court in a ruling heralded as having a future impact on all Illinois business, the justices found in Rosenbach v. Six Flags Entertainment Corp. that the amusement park violated the Biometric Information Privacy Act in taking a teenager’s fingerprints for use in a season’s pass without telling him.

Although Six Flags argued the practice was a mere technicality, the court held with the letter of the law and found a clear violation of the statute.

In June, California passed its own digital privacy law, popularly known as “GDPR Lite,” enabling consumers to keep tabs on what information companies are collecting about them, why they are collecting and storing that data and who they are sharing it with.

Legal executives find themselves partnering with the chief information officer and their IT team to meet these new challenges around data collection and protection.

“We are always — particularly for a company like ours that is responsible, sometimes on a very short-term basis, for significant confidential information — regularly in the process of ensuring that we are in compliance with whatever laws, rules and regulations exist in that space,” said Deborah Steiner, executive vice president, general counsel, chief compliance officer and corporate secretary at Fortune 500 integrated communications company R.R. Donnelley in Chicago.

“We saw the rise of GDPR a couple years ago now and now California has, basically, the same type of law. I think that this kind of regulation will become more prevalent across the U.S. as other states go the same route,” she said.

“This falls heavily to our IT team with the support of our legal team, and there’s a rapid pace there that we have to try to keep up with,” she added.

In the wake of tech giants Facebook, Google and Microsoft being hit with fines earlier this year for running afoul of the European regulations, chief legal officers and general counsels working for U.S. companies with a global presence are paying more attention to its compliance.

“The more we see active compliance measures in that space — as we see in the EU against Microsoft and Google — the more that we see that, the more it’s going to continue to be a prominent area that we’ve got to keep our eyes on and just make sure that we continue to comply with what’s required,” Steiner said.

Reputation is everything

As they continue their upward trajectory in the C-suite during the era of corporate accountability, chief legal officers and general counsels will continue to have to prove their value to their organizations.

One way to do that and rebuild the legal department’s reputation as a partner instead of a roadblock, is to stop being reactive and instead be drivers in developing innovative solutions, said Bickerdike Redevelopment’s Luna.

“In the old way of thinking, the general counsel is the company’s lawyer, the corporate lawyer. I think that often they were thought of as the naysayer or even the legal department as a whole being a roadblock to getting business done,” she said.

“If people view you as a roadblock, or your department as a roadblock, they start finding detours, right? Or loopholes or ways to get around it. When those detours happen, when people aren’t coming to legal, something may happen that could have been prevented. Most importantly, it stops innovation — maybe if we had partnered together in the first place we could have come up with an even more valuable solution,” she said.

In addition to building your own reputation, Jones Lang LaSalle’s Tse said that legal leaders also need to be focused on their company’s reputation.

“Where I look at where we can provide the most value, it’s in how we protect our brand — we never want to end up on the news associated with something bad,” Tse said. “But when something bad does happen, when mistakes are made, how do we respond to that? How does the legal department lead in that response, to those crises? How do we as a company respond and how does legal play a leading role in shaping that response?”

This means that general counsels and chief legal officers have their hands in policies across the company — even social media, according to Wendy Webb Williams, chief legal officer at Sara Lee Frozen Bakery, based in west suburban Oakbrook Terrace.

“It used to be that if there was a significant customer complaint or issue of some sort, consumers or anyone who was unhappy would send a letter or make a phone call and you had time to assess what the issue was, come up with a strategic way to manage the issue and come up with a solution,” Williams said.

“Now you get tweets that get picked up and amplified and your analysis time is hours, minutes in some cases, versus a couple of days to assess and fact find. So, in terms of social media, it’s a combination of partnering with the business to understand that, as soon as something happens, engage your legal partner. It may end up being nothing, but we’re taking a proactive strategy around engaging the customer.”

As chief legal officers and general counsels continue to pick up titles and juggle various job duties and responsibilities, their worth will continue to be judged not just by their legal acumen, but their business acumen as well.

“I think in this day and age of companies trying to be more efficient and more effective with their resources, it’s important to look around the room of those people who are the leadership of your company and think, not ‘does Deb give me the best legal advice, hopefully the answer is yes,’ but what else does she bring to the table?” she said.

“What else can I bring relative to leadership or how else can I be stretched and grown into a business partner for the rest of my executive leadership team,” said R.R. Donnelley’s Steiner.