What qualities do effective general counsel need to be assets to their companies? We asked two prominent GCs for their candia personal views on where you need to be to have your legal department working at optimum for your company and its people

Two hats

Yes, you are a lawyer, that’s hard to forget, but did you know you have a split personality? You’re also an investment director, writes Liu Tiehu, chief legal counsel and head of compliance at Gaw Capital, and if you’re not, you should be. The legal and business roles of a GC require separate skills, but mastering these dual roles brings huge benefits for your company

Liu Tiehu, chief legal counsel and head of compliance at Gaw Capital
Liu Tiehu
Chief legal counsel and head of compliance
Gaw Capital

Even though the business card does not show two job titles, each general counsel should, at least in their mind, know that they wear two hats, that of a lawyer and an investment director, and should possess two sets of skills to perform their function successfully – legal and business.

In contrast to outside lawyers, general counsel are routinely asked to make judgment calls, which often requires balancing the risks and returns. Each deal boils down to two things – economics and allocation of risks. The pure legal work of an in-house counsel, no matter how brilliant, does not generate investment returns. If a deal does not go through, or does not achieve the economic goal, the objective of the transaction is lost. At the same time, general counsel are not purely investment directors, they act as the goal-keeper for risk management.

A successful in-house counsel should be able to use the best judgment to quantify risks, their magnitude and probability, and to balance the two sometimes conflicting goals. A thorough understanding of the business and the ability to analyse the situation to make judgment calls on these issues, such as decisions to trade off some risk for greater economics, is a crucial skill for general counsel.

Sometimes deals fall apart not on economics or risk allocation, but because of a breakdown in communication. This is particularly true when the two sides have different cultural or business backgrounds. Something as minor as a standard FCPA (Foreign Corrupt Practices Act) clause, if not properly explained, may sound like an accusation to a PRC counterparty that it lacks a basic moral standard. Uncontrolled and overzealous representation by outside counsel may sometimes exasperate the situation.

When there are real differences in expectations or economics, it is all the more important for the in-house counsel to clearly, precisely and openly explain the issues and expectations of both sides, putting everything out on the table to see if a deal can be struck, and how a compromise can be reached.

In these situations, it is the job of counsel to make suggestions on alternative means to bridge the gap. To be successful in doing so, the GC should have the ability to read between the lines, to understand the real concern of the counterparty. Legal training and practice position counsel better to facilitate this function.

Even where there is a meeting of minds, things can go wrong in communicating one side’s position and understanding, both at the negotiation table and at the documentation stage. Things get lost in translation. Misunderstandings consume time, patience and often generate mistrust, making a difficult situation more difficult than necessary.

Apart from being clear and precise in language, counsel should also be able to translate and explain in plain, understandable language to the counterparty, and spell out to one’s own team the unspoken words of the other side. In dealing with non-institutional or less experienced counterparties, it is always helpful to start with the nitty-gritty technical process to make sure everyone is on the same page, with no surprises. Guiding your over-whelmed opponent through muddy waters helps generate confidence and trust, and helps in steering the ship on the course where you hope it will go.

Most general counsels are laden with boring corporate and oversight desk work. In some situations, one needs to go to the frontline to play either “good cop” or “bad cop”. Unfortunately, it is more often the latter. A decisive “no” from the top legal guy will make clear that a particular point is not negotiable, period, for a valid reason, hopefully.

To be an effective bad cop, a GC needs the understanding from the deal team and authority from top management to declare something a deal killer, even in a bluff, and when it is not simply a bluff, the power to pull the trigger. It takes guts and courage, and an attitude that the buck stops here.

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