A guest post by Adam Kendall, a partner who heads litigation, advisory and regulation at Bevan Brittan
Kendall: Companies will need their legal teams close to their boards
Business expectations of general counsel and in-house lawyers are changing rapidly – and are likely to evolve still further in the 2020s.
In the past, many companies saw their GCs as technical legal specialists. But recent surveys have found disconnects with some boards. While GCs see their main role as highlighting risk and ensuring legal compliance, Board members want their legal teams to have greater commercial awareness and help make decisions about the strategic direction of the company.
This means looking ahead, anticipating problems and issues further down the track, and having a strong sense of the current market conditions facing the business – and where it can invest.
Climate change
Many investors, customers, employees and non-governmental organisations think that businesses aren’t doing enough to tackle the climate emergency.
Company lawyers are therefore expecting a significant increase in legal risk. A series of lawsuits in the US and The Netherlands may be followed by similar litigation in other countries. So far, it has been hard to establish liability against any single company, but that could change.
Companies should keep their environmental impact, including supply chains and procurement models, under constant review. They should also be mindful of the ‘Green New Deal’ movement, which complains of a lack of vision of what a modern, clean, decarbonised and environmentally rich economy could mean for equality of opportunity and the fairness of society.
Regulation and compliance
New laws on finance, trading, the environment, fraud, money laundering, health & safety and intellectual property mean it can be difficult to keep up with regulatory requirements in all the places where a company does business.
The Finance Reporting Council recently criticised companies for only paying lip service to sweeping changes to Britain’s new corporate governance guidelines. It accused leading businesses of “concentrating on achieving tick-box compliance at the expense of effective governance and reporting”.
A growing body of regulators across many different service sectors, markets and jurisdictions will mean no let-up in the burden of compliance.
Data security
Two years have passed since new data protection regulations came into force and the Information Commissioner’s Office (ICO) has indicated clearly that it intends to use its increased powers of enforcement.
The ICO has already announced an intention to fine two companies a combined £282m for data breaches, and is now looking at other “significant cases”.
For businesses that hold customer and employee data, the bar has been set high and indicates just how costly non-compliance with the expanded data protection regime can be.
Technology
Blockchain, artificial intelligence (AI), big data and other technologies have been one of the biggest disruptors to the legal sector. Even if GCs aren’t using these technologies in their own departments, many of their clients and customers will be.
But algorithms used in AI may not have effective oversight and control, creating new legal concerns for GCs. With continued pressure to do more with less and reduce costs, law department leaders may need to invest in new technologies as a way to enhance their performance, processes and quality of work. Deciding which technology to introduce, and how and when, can be difficult.
Pensions
Troublesome corporate pension schemes will continue to come under increasing scrutiny. The government’s long-awaited Pension Schemes Bill includes new rules for pension dashboards, collective defined contribution schemes and new powers for the Pensions Regulator.
Legal teams will need to assist both employers and trustees to take practical steps, particularly contingency planning, to mitigate risk and ensure that pension schemes are prepared for the future.
Ethics and behaviour
The Solicitors Regulation Authority’s (SRA) tougher new code of conduct – aimed at “promoting a culture where ethical values and behaviors are embedded” – will gain traction this year.
The SRA has made clear that it considers sexual harassment to be serious misconduct and an abuse of authority. Previously, the focus has been on the individual. Now the SRA’s intention is to also regulate and question the culture of firms or organisations where lawyers are employed.
Brexit
We may have left the EU, but for in-house lawyers many worries remain. Although the fog of uncertainty is lifting, and surveys show confidence levels are rising among UK businesses, the transition period marks the start of horse-trading on a new free trade agreement.
The EU says the UK will no longer benefit from the free movement of capital, goods and services. Free movement of people will end for EU nationals, and we’re set to see a new mandatory registration system and a points-based system focused on encouraging skilled migrants.
With the gig economy and contingent workers representing fast-moving areas in employment law, businesses will need to ensure related risks are properly mitigated.
An expanded GC role
The 2020s are likely to see many GCs having an increasingly major role in shaping strategies that give companies the social licence to operate.
To be resilient, agile and take advantage of new opportunities, companies will need their legal teams close to their boards – providing the right governance, legal structures and vision of how to meet the challenges that lie ahead.
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