The role of the General Counsel in the company’s board work has increased. Gone are the days when a lawyer mainly took minutes at a Board meeting. The Board now expects the General Counsel to be proactive and have a business perspective. Global crises, economic uncertainty, responsibility and tighter regulations have also increased the importance of ethical governance and long-term risk management. At the same time, the General Counsel continues to play an important role in the development of the company’s corporate governance.
At Dittmar & Indrenius’ Strategic Advisory event in the autumn, we discussed what is essential for the General Counsel from the perspective of Board work. Experienced corporate lawyers Saara-Maria Helminen and Juhani Pitkänen and Tomi Yli-Kyyny, who has served as CEO and on the boards of several companies, participated in the discussion led by Partner Hanna-Mari Manninen. The following is a summary of the perspectives we heard during the discussion.
Rising ethics
The General Counsel is traditionally assumed to be a skilled lawyer who supervises and steers the company’s Board of Directors in a legally sustainable manner, even in difficult situations.
Now, the fostering of ethics has appeared alongside oversight of legality. When the Board needs a watchdog for matters of accountability or ethical decisions, the task naturally falls to the General Counsel. In turn, the General Counsel must understand that ethics starts from the company’s values and culture. The fact that something seems to be – or legally is – correct is often not enough to solve the wicked problems of our time.
“We foster honesty and the right way of doing things. Just because something seems right is not enough.” –Juhani Pitkänen
The change means that the role of the General Counsel must be redefined in many companies. The requirements for independence must also be taken into account. The new competence profile of the General Counsel also includes a strong business understanding and strategic decision-making. The only way to acquire new skills is to learn them. Fortunately, lawyers are good at this, and practice has already taught many. Of course, the role of a legal expert is still important, but more is required of the Board of Directors and the General Counsel themselves.
“In order to act ethically, everything must start from deep within the company’s culture. The power of corporate culture is immense.” –Saara-Maria Helminen
Good governance poses challenges
Ensuring good governance is also part of the duties of the General Counsel in the work of the Board. It’s not just about how the Board works and makes decisions. Responsibilities between the Board of Directors and the executive management should also be clearly defined. Defining (or not defining) the relationships of jurisdiction affects the operating capacity and profit-making of the entire company.
“The responsibilities between the Board of Directors and the executive management should be clearly defined. It affects the entire company’s ability to operate and generate results.” –Tomi Yli-Kyyny
The flow of information between the Board of Directors and the General Counsel is a special issue. If the General Counsel does not know what is going on in the Board, they cannot help the Board. Therefore, the General Counsel should be where the Chairman of the Board of Directors is when making decisions or informally discussing them. This is not always possible, but some information on relevant matters should be obtained.
In addition, the General Counsel must provide the Chairman of the Board of Directors with the relevant information in advance and participate in the preparation of the Board meeting with the CEO. If there are any surprises at the Board meeting, they will not originate from the lawyer or the operational management. However, it is also important to know when to loosen the tight grip – the form must not be more important than the substance of the decisions, which others are primarily responsible for preparing.
Good governance should be developed actively and innovatively. For example, the monitoring of competitors is an excellent tool. What governance practices do other companies have? And could the Board’s self-assessment be moved more towards peer review in accordance with the Swedish model, in which case the Board’s assessment might reveal more information?
“Gone are the days when a lawyer mainly took minutes at a Board meeting. Now, the Board expects the General Counsel to be proactive – and, in addition to legal competence, to provide ethical guidance and business insight.” – Hanna-Mari Manninen
Fundamentals remain
Even though the General Counsel faces a changing world and new demands, the solutions are not always complex. Returning to the basics is often the best first step, both in crises and in general. All lawyers must be familiar with the fundamentals of legal thinking and the general principles that make it possible to make a legal assessment in different situations. When the foundation is solid, the ability to support the company’s board is always better.
