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
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
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.
At the same time, decisiveness does not equate to cockiness. The greatest sin of a lawyer, GC or any other transaction lawyer is having a bloated ego. GCs, like their law firm counterparts, must always put the interest of the client first. It is not a fight to prove who is right or who is wrong, but one where the company gets the maximum benefit from the deal. Even in litigation situations, one needs to always balance the benefits and costs of a settlement. As one would say: “You have the face, I will have the dough.”
Attention to detail is a great virtue for a successful lawyer, but too much of it can prove to be a handicap for a good general counsel. There are good reasons to engage an outside counsel to deal with the technicalities, even if you know inside and out how to draft a perfect document. A qualified GC should be able to see the big picture and make sure the key areas are covered, using both legal and commercial judgement. In this aspect, experience and business sense is essential.
By way of example, a breakup fee or liquidated damages clause may be the norm in a given market. But where bloodthirsty competitors are lurking nearby, a “bargained for” measure of damages would be vital to take away the economic incentive for an otherwise less scrupulous seller from succumbing to the temptation of a higher offer after signing a binding agreement. No deal is hard until the money is in the bank in most of the evolving markets. But if there is nothing to gain from a breach, all rational businesspeople will refrain from breaking their words.
Last but not least is to strike a balance between work and life. At least in the beginning, such balance is what lures us from firms into in-house work. Too much work and no fun makes a person grumpy and dull. Apart from a quick burnout, any unhappiness will show and come back to impact one’s work. Good humour and a smile, together with a gentle heart and demeanour, can prove to be most effective in communication and building trust.
A well-positioned joke or two in a tense negotiation helps to lighten the atmosphere and assist in getting the points across. Especially working in Asia, building trust is the most important part of the job. Casual chats, jokes and even gossip about family, hobbies and celebrity narrows the gap between human beings, including your potential adversaries. With trust and a sense of comradery, sticky points get easier to resolve.
In short, pause and stop being a lawyer sometimes. Try being a good investment director and good human being for a while, and you can be more effective at the job. Always remember that a good general counsel wears two hats, as long as they are not one yellow and one blue.
For Huang Yiyun, legal director at Autoliv China, it’s all about breaking down the distance between legal and all the other departments. There’s plenty of stereotyping towards lawyers, a lot of it negative, and getting around all this white noise is the key to an effective company driven by intelligent legal
In the first few years of my work, I always had an indistinct impression that business departments in an enterprise – such as the sales department, purchasing department, quality control department or engineering department – always kept their distance from the legal department or compliance department, intentionally or unintentionally. Such distance sometimes meant a kind of awe, sometimes a kind of flattery, and sometimes a kind of perfunctoriness.
The awe finds expression in the fact that everyone regards what the legal department says as an imperial edict. As long as the different business departments disagree, the legal department directly becomes a court to resolve the disputes. The flattery is reflected in the
fact that the business department cosies up with the legal department from time to time with the intention of giving the wrongdoer a way out in certain affairs in the future. The perfunctoriness is shown in the fact that the legal department and the business departments do things in their own ways, and soliciting opinions from the legal department becomes a mere formality.
In such a relationship pattern, the business department feels a burden every time it receives an email from the legal department. What the business department always wants is a green light, not so much the legal opinions from the legal department, even if these opinions are true and objective, and can prevent and control many unnecessary risks.
I always hope that the relationship patterns I have described do not exist between the business departments and the legal department. Instead, I hope to work with my colleagues from the business departments to formulate various strategies, then complete small goals successfully, one by one, and finally celebrate them with high-fives, which has a much higher sense of accomplishment than the simple repetitive work of “replying to all the emails today” every day.
Sometimes I am asked what’s the difference between being an in-house lawyer of a company and a lawyer in a law firm? Do in-house lawyers only read contracts and reply to emails every day? Does a lawyer in a law firm just go to court? When I am asked to answer such questions, I have mixed feelings. I often give doctors as an example. An in-house lawyer of a company is just like a general practitioner, who has to comprehensively understand basic legal knowledge and knows better about laws related to the operation of a company; while a lawyer in a law firm is like a specialist, who answers patients’ questions in specific fields when they go to a hospital for specialist treatment.
Compared with the lawyer in a law firm, the in-house lawyer has a better understanding of the business of the enterprise. When the enterprise needs the support of an external law firm, the in-house lawyer acts as a bridge between enterprise and external lawyer, and the responsibility of such a bridge is far more than simply conveying information. In the work process, the in-house lawyer is also required to perform in-depth communication, control the overall situation, and co-operate side-by-side with the business departments.
A bridge of communication
Sometimes when I organise external lawyers and my colleagues from the business departments to discuss specific cases together, my colleagues will blurt out many specific abbreviations or jargon that are only used in the enterprise, and we have to translate them for the external lawyers – sometimes even doing intralingual translations. When collecting information, external lawyers will ask the business departments to provide specific documents according to legal logic, but the people from the business departments may not be very clear about what the external lawyers want. At this time, the in-house lawyer of the company can accurately convey the information to colleagues from the business departments, because they have both legal background and in-depth understanding of the business.
When such a bridge is built, the communication is much smoother, getting twice the result with half the effort. However, if an in-house lawyer does not have such awareness, and only copies the demands of the business departments to the external lawyers, or only forwards the information of the external lawyers to its colleagues from the business departments, then the in-house lawyer is merely a post-man, and cannot provide any value-added service for the solution of the case. From there, it is no wonder that the business departments will perfunctorily interact with the legal department, only regarding in-house consulting as a formality.
In addition to daily contract reviews or business consultations, in many large-scale investments for M&A or litigation and arbitration cases, in-house lawyers also play the role of a project manager. They must have a very clear understanding of what the deliverables of each node of the project are, what resources need to be invested at each node, and which level of decision-making body needs to step up when the project changes.
Such a control process also needs many communications and judgment calls. The communication not only exists between in-house and external lawyers, but also occurs between the legal department and the business departments. Our communication with external lawyers is to know the progress of a project in real-time, while our communication with the business departments of the same level, and management team of a higher level, is to let these know the progress of the transactions and cases, because such transactions and cases have the most direct impact on the business of the enterprise. The communication of the legal department with the business departments and management team is not only to seek attention, but to consolidate all people to advance together as a whole.
As for judgment calls, let me explain it with the example of our co-operation with external lawyers. In the case of large-scale investment for M&A, we often invite external lawyers to provide support, and experienced external lawyers can provide various structures or transaction modes as optional solutions for our transactions.
However, as the in-house lawyers of the company, we should indeed know best the actual demands of the transaction, and the purpose of the transaction arrangement. We will judge which mode best meets the demands and can achieve the purpose of the transaction, and then convey that valuable information to the business departments and management team, which is really complementary to the above-mentioned communication role.
If we get a variety of modes provided by external lawyers and forward these modes directly, without judgment, then in-house lawyers become merely a postman at best.
Co-operating side by side
One of the reasons I like Autoliv’s corporate culture is that, prior to making any major decision, an agreement will be reached between the superior and subordinate departments of the company, and between the parallel departments, so we can move forward in unison.
We have launched a series of legal actions in the field of IP rights since last year. At the legal level, these actions are only lawsuits on infringement of IP rights. However, before the litigations started, the lawsuit strategy had to be determined by the business departments, especially the sales department, in combination with their sales strategy.
When we communicate with external lawyers in the early stages, there are many schemes for us to choose from. The difference between these schemes lies in the place of litigation, the object of litigation, adoption of administrative means or litigation, etc. After communicating with internal parallel departments and the management team, we preliminarily determined the scheme, and prior to filing a lawsuit, the sales department also communicated with the customer in detail.
At the same time, the legal department needed to co-ordinate with the technical department, the patent department of the company, and the external lawyers to implement as per the established schemes. The in-house lawyers acted as a go-between to link various departments with their own professional knowledge, so as to make everyone move forward together.
Looking at the preceding question:
Do in-house lawyers only read contracts and reply to emails every day? Obviously, not exactly. In order to be a qualified in-house lawyer, you have to possess professional knowledge, communication ability, judgment ability and project management and co-ordination ability to stand up to various tests.
However, it’s also important to read contracts and reply to emails. If we are good at observing and learning, we can know and understand the products, business models, enterprise systems and key work, etc., of other departments bit by bit from these contracts and emails. These details are the cornerstones of the above-mentioned communication. How is a communication bridge built between the business departments and external lawyers without knowing these details? How is the most beneficial trading mode for the enterprise ensured without knowing these details? How can we work with the business departments without knowing these details?
I hope that the work of legal departments is valuable to enterprises’ business, and in-house lawyers shall not act as a referee, giving red or yellow cards to business departments in a disdainful manner. The legal department should not be treated as a puppet, otherwise the company remains the same with or without such a department. When the legal department really works together with colleagues in other departments to tackle difficult problems one by one, it’s really the moment when we get a sense of accomplishment, isn’t it?