A Seat on the Board

A survey last y1178287815718889402 copyear found one fifth of junior in-house lawyers now aspire to the boardroom.[1] I recalled that survey when I was asked a couple of weeks ago  “Should the in-house lawyer accept a place on the Board of their company?”

At present, few UK lawyers can boast of having (so to speak) a key to the Executive Bathroom. In the UK, fewer than 10 percent of in-house lawyers are board members, although a quarter of GC’s of major companies regularly attend Board meetings. The US proportion is much higher; 44% of the top 1500 S&P companies appointed lawyer/directors – a doubling over a ten-year period.[2]

Advantages exist for companies having lawyers on boards. A leading study estimates that a lawyer/director can contribute as much as a 10 percent increase in the value of their corporation[3].  The role of the GC in risk management coupled with increased business skills amongst lawyers is slowly pushing up the number of lawyer/directors in the UK. Some evidence exists that the lawyer/director is more likely to have their advice acted on than their non-director counterpart.

There is no logical reason lawyers should be treated differently than other professionals as candidates, when companies are looking to appoint directors. Lawyers possess as good qualifications as accountants, HR, marketing and other professionals for board membership. Indeed having a diverse board is vital in today’s business world.

My advice, however, is to encourage the proposed lawyer/director to think about two issues and their response to them. These are:

Professional Ethics –Having thrown in their lot with the board, the lawyer cannot claim legal professional privilege over what they say, albeit that there are ways of legitimately working around that. For the lawyer who keeps their membership of their professional body, they stay bound by the principles of their relevant professional code. So for example, a solicitor must not allow their professional independence to be compromised. That presents a much deeper issue. The lawyer/director cannot cross the Rubicon and then keep hoping back and forth every time there is an inconvenient decision.

Business Acumen – many in-house lawyers have a well-developed commercial sense.  But there is a world of difference between understanding the commercial issues and making a decision. That takes a combination of logic, emotional intuition plus the desire to win. The last element clashes with the more altruistic nature of a liberal profession. Exploiting the weakness of competitors, stealing a march on others and taking risky decisions that may impact badly if they go wrong all drive profit growth. As an independent lawyer, you can insulate yourself from these less seemly aspects of business. As a businessperson, you have to be comfortable playing to win to the detriment of others, however unjust that may seem to others.

Stepping into the boardroom, as a director, is a career changing decision; as big as any made before. I would encourage any lawyer who was prepared to make that decision to do so – it increases the talent pool for directors. Just be sure to understand the potential problems appointment creates.

 

[1] GC Global Excellence Report 2013 – September 2013 – http://www.globallegalpost.com/publications/732553b59c50ba66c5f233141ee9226f

[2] Lawyers and Fools: Lawyer- Directors in Public Corporations – Litov, Sepe and Whitehead – http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2218855

[3] Ibid Litove, Sepe and Whitehead


One thought on “A Seat on the Board

  1. Ian, this is an interesting commentary but it many ways misses the mark about what lawyers can bring to the board-room table. That lawyers can add real value – you quote the relevant research – is beyond doubt and you paint a picture of business that is not necessarily true across many different sectors. Many many businesses make very sensible decisions and act fairly at all times. It is inevitable that we can all point to risky decisions in business and in professions themselves but to suggest that the desire to win is not in the DNA of lawyers is perhaps the reason why the profession is finding itself at a cross roads.

    Lawyers are perfectly capable of taking balanced decisions that may be playing to win and the general counsel is particularly well suited to do that and to add real value to the board debate. There is a strong case for independent directors who are business-persons with legal qualifications and experience and providing that the individual acts with integrity then they face no greater challenges than any other independent non executive director. Let’s be careful not to put lawyers on pedestals. In the past that may have happened once too often and perhaps is in part, why lawyers are not sought after as much as they should be around the UK board-room table.

    ND

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