How Covid-19 is changing the general counsel’s leadership role
Even as public companies continue to navigate the effects of Covid-19, they are also confronting longer-term risks brought into sharper focus by the pandemic. Strong oversight and leadership are critical to mitigating and addressing risks, while also positioning the company for long-term success and value creation.
The general counsel has a central role to play in managing corporate risk by catalyzing a company’s business continuity planning, substantiating its strategic planning, strengthening its corporate governance practices and serving as the linchpin between the board and other company executives.
The general counsel is best positioned to help the board minimize risk and demonstrate satisfaction of directors’ fiduciary duties. The general counsel’s responsibilities for co-ordinating board-level briefings and information distributions are anything but perfunctory, and his or her role in ensuring that directors obtain the information they need on a prompt basis goes to the heart of the directors’ duties to exercise their oversight function and guide the company’s strategy.
The general counsel can add significant value by identifying and focusing other company executives on key risks, leading strategy sessions on proposed solutions for addressing those risks and then managing the preparation of cohesive, holistic and complete board materials. Of course, the general counsel cannot be an expert in all areas of business risk and strategy, but the limitations of his or her role highlight the importance of working collaboratively with other members of senior management and engaging outside advisers with relevant expertise when appropriate.
In the complex and turbulent market environment brought on by the Covid-19 pandemic, a company’s business continuity and strategic plans will necessarily evolve as events continue to develop. Although directors need not take on the responsibilities of day-to-day management, the best time to use the talents of individual directors and give them freedom to discharge their oversight duties regarding business continuity and strategic plans is before they are implemented.
The general counsel must determine, in consultation with the CEO and the board chair or lead independent director, the appropriate time to present a developing plan to the board and how best to update the board on future developments. The key is to facilitate an open and constructive dialogue between the directors and management. Although we are focusing primarily on the general counsel’s role in managing the company’s planning processes and board relations, it is also essential that he or she remains involved in the execution of the firm's plans in order to provide a legal perspective and mitigate litigation and compliance risk.
There is significant benefit in preparing for and engaging in communications with the company’s stockholders, employees, customers, regulatory agencies and other key stakeholders during and following a crisis, and the general counsel can serve as the backbone of communications plans implemented by the investor relations (IR) and public relations (PR) teams.
CONTINUITY OF HUMAN CAPITAL
The pandemic has underscored the importance of robust succession planning, not only for the CEO but also for the entire senior leadership team. Inadequate succession planning for senior executives can lead to a more prolonged and expensive executive search process and be a contributing factor in stock-price headwinds.
In light of these risks, some institutional investors, proxy advisers and other stakeholders are increasingly calling for companies to implement and publicly disclose a succession planning process for key executives, which may identify interim chains of command and potential successors. Some companies are also finding that, having reviewed their pipeline, emerging talent needs to be refreshed or the company is in need of managers with skill-sets different from those it has historically sought.
The general counsel is well positioned to help lead these succession-planning and talent-management discussions internally and also update the board on modifications to the company’s talent management approach to take into account lessons from the pandemic.
This is an extract of an article from the Corporate Secretary Yearbook. Click here to read the full article
Lauren Boehmke and Matt Hurd are corporate governance practitioners in the general practice group of Sullivan & Cromwell