Increasing complexity in regulation driving a boardroom seat for General Counsel
Today’s organisations are facing a more complex regulatory environment, changing demands from shareholders and a razor sharp focus on trust, integrity and culture.
The role of the General Counsel is becoming more complex with more being asked every day. It can be hard to quantify as there are varying opinions on what it should constitute, how broad the role is and whether the General Counsel should have a seat at the table.
Throughout 2019, KPMG Australia undertook detailed interviews with more than 25 Australian leading General Counsels from ASX 100 companies, not for profit organisations and the country’s largest privately held companies. We are also drew on global research undertaken by KPMG with leading General Counsels.
The results are not as predictable as might be expected as there were divisions around whether broadening the role means legal professional privilege suffers or whether this expansion is the only way to provide commercially relevant advice. There was, however, agreement the General Counsel should have increased responsibility for corporate governance. Following the Hayne Royal Commission there was a consensus that General Counsel is uniquely situated to act as facilitator between Board of Directors and management team and take on leadership role on a variety of governance-related issues.
It was also a widely held view that the increasing complexity in regulation and greater focus on how organisations respond to regulators is driving companies to ensure their General Counsel has a seat at the executive table.
However, somewhat surprisingly, whether the General Counsel should be the Company Secretary appears to have divided Australian General Counsels. Some of Australia’s leading General Counsels pointed to irreconcilable conflicts, role confusion and workload to support a view that it wasn’t the right fit; whilst others equally as passionately pointed to synergies, board access and ‘best person for the role’ to explain the merits of the role combination. The importance of being both the General Counsel and Company Secretary appeared to be impacted by whether the General Counsel reported directly to the CEO. In situations where this direct reporting line did not exist, it was viewed as much more important to have the access to the strategic deliberations of the Board.
It also emerged that there were mixed views on whether the General Counsel is uniquely equipped to provide the moral conscience for their organisation. The majority of General Counsel consulted by KPMG resisted the introduction of a Chief Ethics Officer, a role much more common in US companies than Australian organisations. A number of General Counsel pointed to the Hayne Royal Commission as evidence that ethical decision making had to be installed as a foundational obligation of every employee. They suggested allocating responsibility to an individual allowed management in particular to throw the metaphorical ethical football over the fence.
In order to succeed General Counsels need a seat at the executive table with direct reporting to the CEO. Only with this access can they provide the strategic, commercial advice and the stewardship being asked of them.
Read the full report, Restoring Corporate Trust: What it means to the General Counsel