The General Counsel and the Non-Executive Director: a powerful collaboration

Our co-founder Kate Bennett is a corporate and securities and governance and compliance lawyer who works with corporate clients of all sizes. In this blog, Kate discusses her thoughts when it comes to the all-important partnership between the General Counsel and Non-Executive Directors to ensure good governance.

 If you are a General Counsel or a Non-Executive Director, you will be no stranger to increasing regulatory enforcement. We are in a world where investor activism, standards of corporate governance and the demand for transparency on Board activity are at an all-time high. The consequences if something goes wrong become greater year-on-year. It’s a huge pressure in the current volatile business climate.

Companies who cultivate a strong culture when it comes to the value of corporate governance have a definite advantage. Their shareholders have greater confidence in decision-making. There is less risk of non-compliance (or even the perception of non-compliance). The end result? A higher share price and a corporate reputation which reflects positively on the Board and the management.

But there is a barrier to companies achieving this.

Despite the huge progress we have made when it comes to how businesses view the role of the General Counsel (GC) and the in-house legal team, some legacy thinking still exists. There can still be an assumption that the GC who prioritises best practice corporate governance lacks commercial perspective and strategic initiative. They can be seen as a “blocker.”

When this is the narrative, it leaves the GC feeling isolated and marginalised. And this, in turn, may lead to exposing the Board and management to unnecessary risk.

So why do these perceptions still linger, despite better understanding when it comes to the role of the in-house legal team and the GC these days?

Based on my own experience working as an in-house lawyer, as external General Counsel and advising GCs and boards, the companies who have the best corporate cultures are the ones where there is strength and transparency when it comes to the relationship between the GC and the NEDs. When this partnership is a positive one, the NEDs discharge their corporate governance duties and create an environment where the GC has the right support to ensure the business functions effectively within the law. The stakeholders respect and celebrate the fact that their GC upholds the highest standards of governance, professional care and duty and acts independently to protect the reputation of the Board and management, even if this does lead to challenges that require a rethink or a different approach.

And it is the NEDs who have the power to set this tone.

The relationship between the GC and the NEDs is such an important one. So it’s surprising that many GCs still do not have these formal or informal reporting relationships and that the roles often operate in siloes from each other. Those GCs and NEDs who collaborate as a partnership, discussing governance, accountability and ethics as one, are the companies who will be able to adapt more effectively to the ever-changing regulatory environment, avoid investor scrutiny and preserve reputation.

As we look set to face an uncertain period, there has never been a greater need for deeper collaboration and partnership on every level of the business to weather the storm. Here’s to a different future, which sees GCs and NEDs working together to deliver the best possible governance for companies and to develop a culture where the role of good governance is truly valued.

If you are a client who would like support when it comes to corporate governance, contact Kate on kate.bennett@arbor.law.