The general counsel plays a key role at Australian and New Zealand companies, and corporate governance is part of that role.
According to ﬁgures released by the Australian Association of Corporate Counsel, 90 per cent of organisations have at least one general counsel. In fact, 91 per cent of privately-owned organisations, and 99 per cent of publicly listed companies have at least one general counsel. In New Zealand, there are 2,700 general counsels that make up 22 per cent of the legal profession.
“Conscience of the company”
About half of all general counsel in Australia work at the board level, and these, of course, have a direct input on corporate governance and compliance.
Businesses in Australia are increasingly focused on corporate governance issues, with specific reference to social responsibility, and general counsels have been deeply involved in establishing responses.
Another area of recent focus is corporate culture. This has, in part, been driven by an increased corporate governance focus on this area, as the Chairman of the Australian Securities and Investments Commission, Greg Medcraft, has suggested there should be legal reform in the area of corporate culture to make companies liable for poor corporate culture that results in a breach of law. Again, general counsels have taken strides forward by helping to establish policies for cultural change.
Building a culture based on corporate governance and its values is critical to the efficient functioning of an organisation. This culture should be reflected in the dynamics of the boardroom – the board should engage in lively debate, incorporating a broad selection of different viewpoints, before making a decision, as the Association for Corporate Counsel Australia observes in a note. The general counsel has work to do in both of these respects. This includes looking at team dynamics, assessing the effectiveness of the board and making sure that directors both know the company’s values and live by them.
The general counsel shares the role with the company secretary of ‘conscience of the company.’ This means that the general counsel acts with authority as an influential trusted adviser. The general counsel uses knowledge of corporate governance to ensure that the board acts with the highest integrity, as Association of Corporate Counsel Australia (ACC) Vice President and Managing Director Tanya Khan notes.
General Counsel: Risk, compliance and regulatory
New Zealand attorney Matt Farrington at the Wellington firm Juno Legal points out that risk management, along with compliance and regulatory assurance are all areas in which the general counsel will collaborate with management.
“The general counsel works with management team leaders that, in turn, have their own line-management responsibilities. Many General Counsel also have non-lawyer direct reports such as risk, compliance, regulatory and practice management staff. In this capacity of developing and leading people, the General Counsel might have regular catchups with her/his team, carry out hiring and other personnel tasks, set performance expectations and complete annual reviews and development plans.”
The recent collapse of a number of finance companies in New Zealand has focused the spotlight on directors’ duties. There have been a significant number of court cases regarding whether directors are fulfilling their fiduciary duties. An increasing number of directors are relying on the general counsel for a view of this aspect of corporate governance, according to the Auckland-based law firm Bell Gully. It’s possible to establish a “minimum baseline” for directors to ensure that they are doing their jobs properly, Bell Gully writes.
In a survey of Australian company directors, 35 per cent said that they spend over 30 hours a year focusing on their top three regulatory issues alone. While many directors have simply accepted this increasing burden, frustration is growing, and much of the burden is being shifted to the general counsel. The corporate governance role in this case, involves, first of all, making certain there is an understanding of the effect of new regulation or in the court cases that interpret that regulation.
General Counsel helps to formulate strategy
With the responsibility to provide legal guidance, the general counsel takes part in strategy and decision-making at the board level, and the general counsel is usually a member of the management committee.
General counsels are systematically involved in all important decision-making processes; they co-decide and bear full responsibility. Many, if not to say most, corporate legal accidents are a result of non- or late involvement of the general counsel in top-level decision-making processes. The general counsel can only fulfil her/his role if she/he is systematically and from the beginning on involved in all important steps of the corporate decision-making process, as the ACC writes.
Not having the general counsel at the table is – if the company is in luck – inefficient and (only) costs money or – if things go wrong – highly damaging to the reputation, the assets and the freedom of the company and its managers.
“In the general counsel’s quest to add more value to the strategic discussion, the first step is to familiarise himself/herself with the particular strategic model(s) or framework used by the organisation to form its business strategy. The general counsel must also willingly take on a careful study of the many elements of the model. Traditionally, this has been an area of weakness for the general counsel,” the ACC adds.
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If you are ready to talk to Diligent, get in touch with one of our Governance Experts today.
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