Meredith Ann Simmons, transactional lawyer based in New York City, discuses the rise of general counsel practise and how the profession has changed from a business perspective...
“I was told there would be no math…”
Lawyers often joke that they went to law school because they thought it meant they would never see another math problem. However, as more companies move their legal departments in-house, these organizations need their head lawyer to be both legally and financially fluent. Initially, the move toward a robust in-house legal department was seen as a way to reduce overhead, but now companies are seeing the potential of legal departments to drive real value in their business.
In recognition of this change, general counsels are expected to be not only trustworthy experts who can provide valuable insight and guidance regarding legal matters, but also business-savvy department heads who can create a budget, leverage technology, and understand the art and science of running the company. For general counsels, this often means being deeply comfortable with both the law governing their business and the numbers that make it tick.
A notable rise in preference for hiring business-minded general counsels among CEOs is compelling evidence that GCs who meet these expectations can provide immense value to a company through a combination of legal expertise and business knowledge.
Closing the Gap Between Ideal and Real GCs:
According to one survey, CEOs reported that the differences between their ideal general counsels and their actual GCs are numerous – CEOs want more strategic, business-forward knowledge and ability from their GCs and fewer than 60 percent of CEOs are getting it. Public companies are more likely to have their GCs on their executive management teams, with private companies falling considerably behind.
The reason for the disconnect wasn’t entirely clear from the survey, but one theory for the discrepancy is the difference in the way lawyers and businesspeople are trained. Lawyers are typically trained in case law and theory, with no business component in their legal education. The practical part of becoming a lawyer and manager is honed over many years in law firms, courtrooms, and at negotiating tables. MBA programs, by contrast, turn out a finished product – financially fluent leaders instantly ready to lead departments and develop a strategy.
This experience gap may be closing as law schools recognize the demand for business-minded in-house counsels. Schools like Georgetown University Law Center have begun offering innovative, week-long “simulation courses” designed to allow students to tackle real-life business problems, and New York Law School has recently launched the James Tricarico, Jr. Institute for the Business of Law and In-House Counsel, which includes a “mini-MBA” offering.
Risk, Litigation, & Crisis Management:
Regardless of whether a company is public or private, there are a number of ways in which general counsels can bring value to a company. CEOs generally agree that the top three ways GCs can make the biggest impact are through managing business risk, handling litigation, and serving as a trusted advisor in a crisis.
Providing calculated insights into business matters and providing educated, resourceful guidance to CEOs and other executives are skills that are more desirable for general counsels. For example, quoting case law to a CEO in crisis will not help one bit when you are trying to protect her reputation and help decide whether, where, and how to start a lawsuit. Through analysis and management of risk, litigation, and crises, general counsels can help businesses make more profitable and sustainable decisions while also ensuring that they operate within relevant legal parameters.
Business & Shareholder Value:
Business-minded general counsels stand to add value to the business by playing an important role in a company’s governance. Whether advising, assessing, or overseeing transactions, litigation, or corporate dealings, general counsels should not only consider the legal implications but the broader, long-term impact of such practices as well.
Building value for a company is not merely a defensive role for a GC. By engaging with the business on its considerations beyond mere legal minutiae, GCs can demonstrate that they have the chops to be members of the core executive team. This can also be reinforced by clearly analyzing risks, anticipating long-term outcomes, and prioritizing plain-spoken communication over jargon and legalese.
Planning for Succession:
Despite the trend towards hiring GCs with both legal and business expertise, companies have not yet mastered succession planning within their legal department. The unfortunate trend with general counsels is a lack of management preparedness regarding their departure or retirement. More than half of surveyed CEOs do not know who will replace their current GC, and private companies are even less likely to have a plan in place. The survey collectors determined that there appears to be a correlation between a missing plan for GC succession and decreasing company revenue.
Successful GCs may therefore want to prepare for the company’s longevity by having a plan in place for their departure or retirement. Having a roadmap to follow for when general counsels leave is not only a sound business practice – it’s good governance. And succession-planning for all key roles within a business – not merely their own – is a great policy for GCs to develop alongside their CEOs.
The demand for business-minded general counsels will likely continue to grow. So if general counsels are to meet the changing standards that CEOs have for them, it is imperative that current lawyers and law schools continue to evolve and incorporate practical and business education as a component of legal education.
Prioritizing a business-oriented practice as general counsels will improve the company and industry-wide practices and provide more opportunities for lawyers – even if it means that for lawyers of the future, there will be math!
Meredith Ann Simmons is a battle-tested, innovation-driven transactional lawyer who leads global deal and operations teams to success.
Suggested Citation: Meredith Ann Simmons, The Rise of Business Minded General Counsels, JURIST – Professional Commentary, July 7th, 2021, https://www.jurist.org/commentary/2021/07/meredith-simmons-general-councel-business/.
This article was prepared for publication by Vishwajeet Deshmukh. Please direct any questions or comments to her at email@example.com
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