By Blandine CORDIER-PALASSE, Décideurs Magazine: Strategy Finance Law
Lawyers used to be expert fire-fighters, reactive and involved at a very late stage. Today, they are business partners, proactive and with a strategic impact. They intervene at the heart of the business and increasingly upstream.. The aim is to structure the legal and financial engineering of transactions alongside management and operational staff.
Décideurs. You were a lawyer and then a legal director in listed groups. Today, you're an entrepreneur and head of a specialist headhunting firm. How has the role of the legal function changed?
Blandine Cordier-Palasse. Today, the legal function has evolved towards a more strategic dimension. In a number of groups, senior managers have decided to change the legal director. We are increasingly recruiting profiles that are very much business partners, more impactful, solution-oriented, proactive and involved upstream with management and operational staff.
Often with a dual education in business and law, supplemented by international experience, they understand the approach of the company director. He has a global vision of the group's strategy and its
challenges. In an international environment and an increasingly complex ecosystem where agility, proactivity and responsiveness are crucial, this has become a major asset.
More and more managers are realising the value and necessity of involving the legal director at a very early stage in any project, right from the discussions on the structure of the deal, at the heart of the business, to understand the risks. This has been the case in the United States for many years. Managers do nothing without their lawyer or general counsel. As Pierre Charreton, General Secretary of Areva, rightly points out, "Not everything in a company is legal, but the law is everywhere".
Décideurs. How has the position of the Legal Department changed?
B. C.-P. According to a recent AFJE survey, more than 60 % of legal directors now report to the chief executive or even the chairman, and are ex officio members of the executive committee. This figure is rising, but in other countries it is over 90 %. General management has realised that reporting to the highest level is essential if projects are to be approached from a global, cross-functional perspective, integrating the legal and risk dimensions.
In particular, this ensures the visibility of the Legal Department. This ensures that the legal fibre is developed among all employees, as well as its credibility and independence, particularly in relation to the financial prism. A legal director recently explained to me that the finance director to whom he reported had refused to make a provision for a dispute so as not to impact the accounts, which led to a profit warning for the US-listed group eight months later when the court ruling came down.
"IN THE UNITED STATES FOR MANY YEARS, EXECUTIVES HAVE NEVER DONE ANYTHING WITHOUT THEIR LAWYER OR GENERAL COUNSEL".
Décideurs. How is the legal department now more involved in strategy?
B. C.-P. Close to management and the board, the legal department has become a fully-fledged player in the definition of strategy. The legal director is increasingly involved at an early stage in defining the company's strategy.
each member of the management team with the legal engineering needed to support and contribute to the deployment of the overall strategy. This enables the legal perspective to be integrated, objectives to be shared with management and operational staff, and a certain number of risks to be pre-empted. Then, by setting priorities and organising appropriate awareness-raising and training initiatives, the means and resources can be adapted.
Lawyers thus become facilitators and "business accelerators" for managers and operational staff.
Décideurs. How has the scope of the Legal Department's work changed?
B. C.-P. Given the globalisation of the business world and increasingly complex regulations and standards, its role has become cross-functional. When we recruit, we look for expertise because it creates added value. We can see that the legal department covers not only the core functions - corporate, corporate life and governance, contracts, advice to operational staff, M&A, litigation - and increasingly - in close collaboration with other functions - risk management, compliance, insurance, lobbying, real estate, data privacy, patents, tax law and employment law. We are also recruiting directors of labour relations, CSR or experts in labour law, who report directly to the HR department.
Décideurs. What are the new challenges facing a legal director in 2015? What is at stake in digital technology? Compliance?
B. C.-P. Digital technology is short-circuiting the company/customer relationship and transforming communication and marketing issues. With the development of information flows, every message sent out is likely to find its way to the outside world, and is likely to generate financial or non-financial risks that could have an impact on the company's image or reputation. The business environment is changing, with all the risks and challenges that this entails. The legal function must anticipate and analyse these risks, some of which even fall under the heading of business intelligence, and raise awareness of them among stakeholders.
Paradigms have changed. So have many lawyers. They have developed their leadership skills. These lawyers provide concrete, pragmatic and efficient solutions. They anticipate and contribute to the transformations that are shaping the environment, the markets and the company. They are also involved in an overall risk management approach that goes beyond purely legal risks (financial audits, fraud, corruption, etc.). Finally, the role of this department has become increasingly important with the evolution of corporate governance. And compliance is a structuring element of good governance. It is no longer seen as a constraint, but as a genuine tool for change and an organisational culture.
Decision-makers. How can we understand risks and turn them into opportunities?
B. C.-P. A General Manager once said to me: "In my view, the creativity of our lawyers strengthens our competitiveness and ensures our margins. They tell me how far to go, either to protect us or to allow us to take risks. These margin points are obviously reflected in our results and our appetite to conquer new markets aggressively and securely. The legal and financial arrangements are clever and optimised. The aim is to make an active contribution to overall performance, to protect management from civil or criminal liability, and to preserve the company's image and reputation. Risk becomes opportunity. The legal tool is a key competitive differentiator. Not all managers are aware of this yet.
Decision-makers. So the function itself is a centre of value creation?
B. C.-P. Exactly. Well-crafted contracts don't make much noise. Yet they need to be promoted. Unfortunately, we only consider the cost of disputes. If we avoid making the wrong acquisition, we create value because we avoid losing value. Intangible assets, such as brands, patents and data, are elements of value creation. We need to protect them either by defending ourselves or by being aggressive. Even aggressiveness creates opportunity. For example, a group that systematically attacked its competitor every time it filed a patent application, whether justified or not, destabilised it and made it respect its position. It forced them to be all the more vigilant about what their competitor was filing. This increased his costs, so reduced his margins, slowed him down... and the aggressor gained ground.
The Legal Department is increasingly involved in the governance of groups. It does this both in terms of opportunities and in terms of controlling risks at the lowest possible cost through risk reduction actions (cause and effect). In an increasingly complex international legislative environment, the General Counsel's legal creativity ensures that strategy is deployed with certainty. To this must be added their intellectual agility and ability to anticipate. They are primarily involved with the Board of Directors. He is also involved with general management to ensure the company's good governance and compliance. He ensures that all regulations and standards are complied with, and that the company's values are respected.
"THE LAW HAS BECOME A STRATEGIC TOOL IN THE SERVICE OF A COMPANY'S COMPETITIVENESS, IN THE SAME WAY AS FINANCE, MARKETING OR HUMAN RESOURCES"..
