ACC Board Members See Opportunities in the Midst of Greater Regulatory Scrutiny, Increased Client Demands & Efficiency Directives in the New Year
As 2009 comes to a close, some will look back on the past year disheartened by the economic upheaval that occurred, while others will look ahead with cautious optimism, confident that in the midst of challenges the coming year will bring lucrative opportunities for growth and prosperity. Articles and Blog posts abound, with everyone offering their predictions for the coming year. While nobody has a magical crystal ball to foretell the future, we can learn from events of the past and the current environment to not only predict, but also prepare, for what is yet to come.
I have always found our ACC community to be a great source of support and insight and as Ivan Fong, ACC’s former Board Chair, noted in a previous ACC Docket message, “During times of economic stress, it is important to hold fast to your core values and to the people … who can support you in your time of need and give you hope and inspiration.” By tapping into the collective wisdom of ACC’s Board of Directors, we can all glean added insight to stay on top of the trends – and help us to prepare for 2010.
When asked what the greatest challenges will be for in-house counsel, as well as where new opportunities will emerge, ACC Board members offer the following predictions.
David Allgood, Executive Vice President & General Counsel, Royal Bank of Canada: We will have to respond to the impact of the global financial crisis on financial regulations and I see a significant regulatory onslaught occurring, particularly for financial institutions.
I am expecting – looking for, actually – more use of project management principles by the outside law firms I work with to ensure greater efficiency and cost containment.
Jonathan Block, Attorney, Former Vice President and General Counsel, Salem Communications Corporation: The current political winds are blowing in favor of increased regulation, and given the speed in which it is happening and the polarization of the political process, it is hard to know where we’ll land until we are already there. With all of the changes, reduction in resources and increased pressure to take risks that will potentially jeopardize the company, the complexity of how in-house lawyers go about performing their job will continue to increase.
The increased complexity and reduction in resources, however, provides an even greater opportunity for in-house lawyers to demonstrate their strategic value to the organization. With greater challenges facing companies, GCs have the opportunity to burnish their image as the go-to problem solver for the company. This is also a great time for companies to start building for the recovery and investing in their future. With even well run businesses having to eliminate assets to address cash flow issues over the past few years, strong companies now have the ability to acquire some especially valuable resources (including human capital) in a manner and at a price they previously couldn’t come close to.
Jeffrey Carr, Vice President, General Counsel & Secretary, FMC Technologies, Inc.: In-house counsel must determine how to make value-based engagements the standard for their own teams while simultaneously implementing value-based engagements with their outside counsel.
In looking ahead, I see the ACC Value Index, the client satisfaction measurement tool developed to help ACC members share meaningful information about the value they get from their outside counsel, being recognized as the industry standard.
Elisa D. Garcia C., Executive Vice President & General Counsel, Office Depot, Inc.: For in-house lawyers with public companies, we will have to nimbly navigate an avalanche of new legislation and regulation in the governance arena. From proxy access to say-on-pay, from risk committees to golden parachutes, and all the enhanced disclosure requirements that will accompany these and other regulations, I foresee substantial confusion and lack of guidance from the regulators. This is especially concerning because of the “anti-corporate” bias of regulators. I hope the regulators work with the business community to ensure that the new rules are clear and enforced fairly.
I encourage smaller and diverse [law] firms to embrace the ACC Value Challenge as a game changing differentiator. I think the agility of a smaller firm will enable it to be more creative in bringing value solutions to corporations and thereby helping them gain opportunities they may not have otherwise had.
Michele Gatto, Executive Vice President, Corporate Services & Chief Legal Officer, National Life Group: In the current economic environment it will be incumbent on in-house counsel to manage expenses carefully and strategically, with a focus on increased efficiency, productivity and value. This is an opportunity for in-house lawyers to demonstrate their abilities to be good leaders, as well as good lawyers. We will also need to stay focused on new developments in the legislative and regulatory environment (financial services reform, health care reform, etc.).
J. Alberto Gonzalez-Pita, Senior Vice President & General Counsel, Las Vegas Sands Corporation: Some trends are clearer than others, and increasing regulation is one that stands out. This will happen at the state and federal levels and will impact a wide-range of small and large businesses in numerous industries. I believe we will also see increasing enforcement of existing regulations with larger fines and penalties for non-compliance. Identifying, analyzing and complying with these regulations, as well as ameliorating their impact will require a significant investment of time and resources by in-house counsel. Another trend is the continuation of the changing dynamics between companies and their outside counsel. The economic recovery is unlikely to be fast or robust enough to diminish ongoing cost cutting efforts, and outside counsel will continue to feel pressure on their fees. The ACC Value Challenge will continue to gain momentum as an effective way for in-house lawyers to achieve demonstrable savings and efficiencies. We will continue to see more alternative fee arrangements and less hourly rates through 2010 and beyond.
There will certainly be numerous changes in store for specific industries (banking and finance, insurance, health care, pharmaceutical and hydrocarbons), but I’m not a good enough prognosticator to say what those will be. "Legal" change is in the air more so than in years past, and I believe this will impact the vast majority of in-house lawyers in some fashion.
Teresa Kennedy, Assistant General Counsel, Cox Communications, Inc.: Lawyers will be stretched by handling more matters than ever in-house, with less support from our business partners. This situation will require us to be more actively engaged in vetting business issues, which of course, presents us with both opportunities and challenges!
Jonathan Oviatt, Chief Legal Officer and Secretary, Mayo Clinic: We will continue to see increased expectation that legal services will measure up to the same metrics of "quality and value" that are applied to all other shared services in the organization. Effective lawyers will be those who intentionally partner with clients to improve quality and value, while reducing expenses. With increased regulatory complexity and decreasing budgets, effective risk balancing and risk management skills are essential for effective lawyers.
"Tone at the Top" has never been more important and effective CLOs have a critical role in ensuring that our clients do the right thing. Additionally, it has never been more important for us to avoid taking ourselves too seriously—we must maintain balance.
Carol Ann Petren, Executive Vice President & General Counsel, CIGNA Corporation:The greatest challenges for in-house counsel will definitely include an increased focus on executive compensation and risk management. There should also be an increased willingness to take advantage of developing business opportunities with a more stable economy and clarity on the regulatory front.
Eric Reicin, Senior Vice President & Deputy General Counsel, Sallie Mae, Inc.: In times of stress, uncertainty and an enhanced regulatory environment, in-house counsel need to be more than practitioners, they need to serve as both a trusted advisor and business partner. During the last 20 years – especially the last five – we have seen a dramatic shift in the speed and efficiency of the practice of law with the addition of each new technology (overnight mail, fax, electronic word processing, electronic legal research, e-mail, e-filing/knowledge management, internet search, video conferencing, intranets, IM, BlackBerry, iPhones, Twitter and private secure social networks), and this trend will continue, mostly to the detriment of our personal lives and to the perceived benefit of our clients. It will continue to fall to us to encourage our clients to prioritize, recognize when immediate turn-around is required and when further thought is preferable. Thoughtful legal advice often takes more than 140 characters of text.
Martine Turcotte, EVP & Chief Legal & Regulatory Officer, Bell Canada: One of the major regulatory and investor areas of focus will be on executive compensation where more disclosure -similar to a management and discussion analysis focused on compensation – that is now required. While we had to go through this as one of the first Canadian issuers last year, regulators have kept a close eye on this, and now with “say on pay” resolutions having been adopted by a few issuers like ourselves, it will be an interesting discussion with governance organizations and major investors. On the administration side, top focus will remain on outside counsel costs and the value proposal.
Norman Wain, VP, Corporate Legal Affairs, Assistant General Counsel, The Finish Line, Inc.: I see our greatest challenge as balancing the corporate expectations while continuing to decrease (or manage) costs in light of tighter economic conditions. In-house counsel need to learn to work more efficiently, better manage outside counsel (perhaps changing fee structures) and then battle senior management to still pay attention to legal when they are desperately focused on reducing costs and cutting programs from their budgets.
In terms of prospects for the year ahead, technology is constantly changing, which creates new opportunities. In addition, we will need to monitor new government regulations and what their impact will be on our businesses.
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From regulatory hurdles – to increased scrutiny – to strengthening relationships with outside counsel, it’s clear that in-house counsel will have their hands full in the coming year. In addition to increased government scrutiny and regulations, I see increased regulation of the legal profession, with more laws and regulations governing the conduct of lawyers. And, while the use of value-based fee arrangements will increase, the billable hour will not disappear. I believe, however, that it will no longer be the default billing mechanism that parties use without consideration of other approaches.
As these changes take hold, ACC will continue to respond to in-house counsel needs and challenges in the coming year through our educational programs, member communications and advocacy efforts. If you have additional thoughts and predictions, I’d love to hear from you, too.