The Case for the GC

In a time of increasing regulatory risk, global complexity and shareholder activism, the role of the corporate general counsel in the boardroom has never been more important. Yet, companies have been slow to recruit general counsels or seasoned attorneys to serve as independent directors. Among the nearly 3,900 independent directors of publicly traded Fortune 500 companies just 5.1% are or have been general counsels.

Why such low representation? Some of it is based on questionable logic. “We already have a GC in the room,” goes one argument. “We don't need another one.” Of course, most boards already have the benefit of the perspective of the company's CFO in the boardroom, but that does not deter them from recruiting outside CFOs to serve as independent directors. In fact, CFOs and former CFOs account for 16.5% of independent board seats among the Fortune 500. Though some of the relative over-representation of CFOs compared with GCs can be attributed to the Sarbanes-Oxley requirement that a Board's audit committee include at least one “financial expert,” the unique experience and insight of a GC clearly is undervalued when boards consider new candidates.

The Role of the GC

The GC role has evolved dramatically in the last 15 years, and today encompasses much more than delivering legal advice in a corporate setting. Today's GC serves as a trusted adviser to senior management and boards of directors on a wide range of strategic and operational matters. General counsels as a whole have risen to a new level of responsibility, becoming their companies' first lines of defense, proactively looking over the hill at what's coming at them, and acting as a strategic business partner. Against the backdrop of an increasingly complex business environment, this evolution of the GC role and the competencies necessary for success in the role, can make high-performing GCs, including many recently retired, ideal board candidates.

A recent survey Heidrick & Struggles conducted of general counsels currently sitting on corporate boards offers one indicator of the heightened role of GCs. Virtually all of them, in their home companies, attained the status of strategic business partner with their CEOs. They have played a particularly valuable role in company success when it comes to the many risks organizations face ' legal, regulatory, reputational, financial and operational ' not only in the country where they are headquartered, but around the world. Today's GC is central in determining where the company faces the greatest risks, how multiple risks interact, and how those risks can be managed consistent with the company's business objectives.

How They Operate

Rather than simply controlling every risk at the expense of the organization's mission, these business-savvy GCs operate within a framework of acceptable risk, helping the CEO weigh the benefits and drawbacks of different courses of action and, when obstacles arise, helping develop alternatives that advance the business strategy. Further, in working with other members of the senior executive team, these strategically minded GCs are brought into discussions of major initiatives at their inception, bringing to bear their business insight as well as legal skill. This strategic experience and perspective is particularly valuable today as boards increasingly return to their traditional role as sounding boards for corporate strategy.

Most of the general counsels we studied have experience directing government relations. In an environment of increasing regulation in many industries ' most notably financial services, healthcare, and energy ' the ability to navigate government at the federal level and work with regulatory agencies is in high demand. These government-savvy general counsels know how to interact with policymakers, deal adroitly with regulators, and translate government policy into the business implications for the company. They are familiar with an ever-increasing body of regulations and they counsel the CEO and the board about compliance issues. They stay abreast of any pending legislation ' domestic and global ' so that the company can develop compliance strategies well in advance. Most importantly for board service, they know how to proactively translate government policy into the business implications for the company. This ability adds yet another valuable dimension to the strategic perspective such GCs can provide as independent directors.

On the Board

Inherent in the role of general counsel is a relationship particularly relevant to board service: the GC's client is the corporation as a whole. Like independent directors, the GC must have a strong relationship with the CEO, while putting the overall best interests of the company first. This delicate balancing act requires courage and resoluteness, unquestioned integrity, and considerable diplomacy, qualities deeply valued in any board director.

The caliber of GCs has never been higher. Because the role has become so interesting and multi-faceted, it has increasingly attracted the best and brightest. Top performers in law firms and government, as well as corporate incumbents looking for greater challenges, are drawn to a role that will allow them to exercise the full range of their interests and the skills they have acquired over the course of their careers.

Further, GCs in multi-national corporations work in far more complex operating environments than ever, requiring skills and perspectives that translate directly to today's boardroom. Globalization, for example, has given them an international outlook in the broadest sense, a sine qua non of board service now. Globally minded GCs must skillfully manage the legal complexities of international operations, tax laws, and labor laws, as well as anti-corruption laws like the U.S. Foreign Corrupt Practices Act (FCPA) and the UK's Bribery Act. In addition, they must manage a geographically dispersed legal function as well as a network of relationships with international law firms.

The complexities of intellectual property in an age of highly complex and rapidly changing technology, fierce competition, and sophisticated theft have put GCs on the front lines of intense competitive battles. They must not only defend IP, but also integrate legal, technological, and business knowledge to help drive competitive advantage. In that capacity, they act, once again, as strategists with deep understanding of business models and the IP that drives them.

Increased complexity has arrived in the form of issues that have moved to the front burner in recent years ' cybersecurity, privacy, diversity, shareholder activism ' broadening the role of GC.

Additionally, many General Counsels have taken on responsibilities beyond the Chief Legal Officer role with the supervision of staffs such as Human Resources, Communications and Government Relations.

As a result, the best of today's GCs in multinational corporations are comfortable with complexity and have the ability to cut through to the heart of a complex, multifaceted issue ' valuable traits for any board director. Directors with GC experience remain under-represented on boards despite these compelling advantages. Exposure, it appears, is critical: The GC-directors in our study had typically worked at one time or another with one or more of the other sitting directors. They are known entities to a Board member.

“Experienced attorneys can bring real value to the boardroom,” says Richard I. Beattie, Senior Chairman of the Simpson Thacher & Bartlett law firm, as well as Chairman of the Board of Heidrick & Struggles. “Most have been in the boardroom often dealing with difficult situations, and they bring a helpful perspective to the issues.”

Conclusion

Taken together, the new responsibilities that GCs in multinational corporations have acquired add up to the same competencies that boards look for in any director: strategic vision, business acumen, global orientation, and experience with today's most burning issues. Like any independent director, the GC on a board is there to offer wise counsel, not legal counsel. The latter is the job of the corporate GC already in the boardroom.

Victoria Reese is Global Practice Managing Partner for the Legal, Risk, Compliance & Government Affairs Practice at Heidrick & Struggles, a provider of senior-level executive search, culture shaping and leadership consulting services. Stephen W. Beard is Executive Vice President, General Counsel and Chief Administrative Officer for Heidrick & Struggles.

In a time of increasing regulatory risk, global complexity and shareholder activism, the role of the corporate general counsel in the boardroom has never been more important. Yet, companies have been slow to recruit general counsels or seasoned attorneys to serve as independent directors. Among the nearly 3,900 independent directors of publicly traded Fortune 500 companies just 5.1% are or have been general counsels.

Why such low representation? Some of it is based on questionable logic. “We already have a GC in the room,” goes one argument. “We don't need another one.” Of course, most boards already have the benefit of the perspective of the company's CFO in the boardroom, but that does not deter them from recruiting outside CFOs to serve as independent directors. In fact, CFOs and former CFOs account for 16.5% of independent board seats among the Fortune 500. Though some of the relative over-representation of CFOs compared with GCs can be attributed to the Sarbanes-Oxley requirement that a Board's audit committee include at least one “financial expert,” the unique experience and insight of a GC clearly is undervalued when boards consider new candidates.

The Role of the GC

The GC role has evolved dramatically in the last 15 years, and today encompasses much more than delivering legal advice in a corporate setting. Today's GC serves as a trusted adviser to senior management and boards of directors on a wide range of strategic and operational matters. General counsels as a whole have risen to a new level of responsibility, becoming their companies' first lines of defense, proactively looking over the hill at what's coming at them, and acting as a strategic business partner. Against the backdrop of an increasingly complex business environment, this evolution of the GC role and the competencies necessary for success in the role, can make high-performing GCs, including many recently retired, ideal board candidates.

A recent survey Heidrick & Struggles conducted of general counsels currently sitting on corporate boards offers one indicator of the heightened role of GCs. Virtually all of them, in their home companies, attained the status of strategic business partner with their CEOs. They have played a particularly valuable role in company success when it comes to the many risks organizations face ' legal, regulatory, reputational, financial and operational ' not only in the country where they are headquartered, but around the world. Today's GC is central in determining where the company faces the greatest risks, how multiple risks interact, and how those risks can be managed consistent with the company's business objectives.

How They Operate

Rather than simply controlling every risk at the expense of the organization's mission, these business-savvy GCs operate within a framework of acceptable risk, helping the CEO weigh the benefits and drawbacks of different courses of action and, when obstacles arise, helping develop alternatives that advance the business strategy. Further, in working with other members of the senior executive team, these strategically minded GCs are brought into discussions of major initiatives at their inception, bringing to bear their business insight as well as legal skill. This strategic experience and perspective is particularly valuable today as boards increasingly return to their traditional role as sounding boards for corporate strategy.

Most of the general counsels we studied have experience directing government relations. In an environment of increasing regulation in many industries ' most notably financial services, healthcare, and energy ' the ability to navigate government at the federal level and work with regulatory agencies is in high demand. These government-savvy general counsels know how to interact with policymakers, deal adroitly with regulators, and translate government policy into the business implications for the company. They are familiar with an ever-increasing body of regulations and they counsel the CEO and the board about compliance issues. They stay abreast of any pending legislation ' domestic and global ' so that the company can develop compliance strategies well in advance. Most importantly for board service, they know how to proactively translate government policy into the business implications for the company. This ability adds yet another valuable dimension to the strategic perspective such GCs can provide as independent directors.

On the Board

Inherent in the role of general counsel is a relationship particularly relevant to board service: the GC's client is the corporation as a whole. Like independent directors, the GC must have a strong relationship with the CEO, while putting the overall best interests of the company first. This delicate balancing act requires courage and resoluteness, unquestioned integrity, and considerable diplomacy, qualities deeply valued in any board director.

The caliber of GCs has never been higher. Because the role has become so interesting and multi-faceted, it has increasingly attracted the best and brightest. Top performers in law firms and government, as well as corporate incumbents looking for greater challenges, are drawn to a role that will allow them to exercise the full range of their interests and the skills they have acquired over the course of their careers.

Further, GCs in multi-national corporations work in far more complex operating environments than ever, requiring skills and perspectives that translate directly to today's boardroom. Globalization, for example, has given them an international outlook in the broadest sense, a sine qua non of board service now. Globally minded GCs must skillfully manage the legal complexities of international operations, tax laws, and labor laws, as well as anti-corruption laws like the U.S. Foreign Corrupt Practices Act (FCPA) and the UK's Bribery Act. In addition, they must manage a geographically dispersed legal function as well as a network of relationships with international law firms.

The complexities of intellectual property in an age of highly complex and rapidly changing technology, fierce competition, and sophisticated theft have put GCs on the front lines of intense competitive battles. They must not only defend IP, but also integrate legal, technological, and business knowledge to help drive competitive advantage. In that capacity, they act, once again, as strategists with deep understanding of business models and the IP that drives them.

Increased complexity has arrived in the form of issues that have moved to the front burner in recent years ' cybersecurity, privacy, diversity, shareholder activism ' broadening the role of GC.

Additionally, many General Counsels have taken on responsibilities beyond the Chief Legal Officer role with the supervision of staffs such as Human Resources, Communications and Government Relations.

As a result, the best of today's GCs in multinational corporations are comfortable with complexity and have the ability to cut through to the heart of a complex, multifaceted issue ' valuable traits for any board director. Directors with GC experience remain under-represented on boards despite these compelling advantages. Exposure, it appears, is critical: The GC-directors in our study had typically worked at one time or another with one or more of the other sitting directors. They are known entities to a Board member.

“Experienced attorneys can bring real value to the boardroom,” says Richard I. Beattie, Senior Chairman of the Simpson Thacher & Bartlett law firm, as well as Chairman of the Board of Heidrick & Struggles. “Most have been in the boardroom often dealing with difficult situations, and they bring a helpful perspective to the issues.”

Conclusion

Taken together, the new responsibilities that GCs in multinational corporations have acquired add up to the same competencies that boards look for in any director: strategic vision, business acumen, global orientation, and experience with today's most burning issues. Like any independent director, the GC on a board is there to offer wise counsel, not legal counsel. The latter is the job of the corporate GC already in the boardroom.

Victoria Reese is Global Practice Managing Partner for the Legal, Risk, Compliance & Government Affairs Practice at Heidrick & Struggles, a provider of senior-level executive search, culture shaping and leadership consulting services. Stephen W. Beard is Executive Vice President, General Counsel and Chief Administrative Officer for Heidrick & Struggles.