The Dance of Law and Business: Finding Rhythm in Corporate Sectors

30 November 2023   |   By Wojciech Dziomdziora

In-house Management

The Dance of Law and Business: Finding Rhythm in Corporate Sectors

A general counsel responsible for the delivery of legal services to a major corporation is faced with unparalleled challenges and opportunities. The burden of complying with an ever-increasing body of regulations (…) disparate corporate activities as personnel policies, safety practices, environmental controls and financial decisions (…). Corporations have by and large been the unwilling objects of litigation and regulatory explosion, thus causing corporate managers to join in the chorus against rising legal costs. Given the growth in volume, complexity and costs of legal services, the general counsel of a major corporation, responsible for managing the delivery of required legal services to its corporate client, faces some serious challenges which when examined carefully provide attractive opportunities for improved management for improved management.[1]

Sounds familiar? I believe so. Those words were written four decades ago by Richard L. Fischer, the Vice President and General Counsel of Aluminium Company of America. Let’s discuss our current place on the business arena. What is our role in the so-called dance with business. Is it the same today as in the past? What has changed and what approach to take? I conducted research and reviewed reports on our profession from consulting firms including McKinsey, EY, PWC and Gartner. The key message from my analysis is that our profession has experienced substantial changes in recent years. The emergence of ESG has significantly impacted our work, and technological advancements have altered the way we operate. So let me reiterate: We have experienced changes in what we do (ESG) and how we do it (technological advances). I will elaborate more on this topic later in my speech.

Let there be no doubt, our profession is undergoing changes that are significant and call for a proactive approach and re-evaluation. However, my take is that these are not fundamental changes, because they don’t undermine the core of our profession and mission. And what is this overarching mission? What is our goal?

Our core functions are well-known and include providing support and advice to the C-suite and other leadership in our organizations. We also prepare and review legal documents such as business contracts, employment contracts, so-called internal legislation and provide legal and business advice. We coordinate litigation, assess opportunities in court and administrative proceedings, take care of corporate governance, and conduct due diligence in merger and acquisition processes. I could go on… But our ultimate goal is to provide a sense of security to the C-suite, owners, investors, employees, rating agencies, clients of our firms, regulators, and other stakeholders. This objective remains unchanged.

Giuseppe Tomasi di Lampedusa wrote in his famous novel ‘The Leopard’: “Se vogliamo che tutto rimanga come è, bisogna che tutto cambi – If we want everything to stay as it is, everything must change.”

So is this linked with our world?

ESG

Let’s begin with the shift specifically towards ESG. What are the factors that have made it so crucial? Firstly, we must acknowledge the Covid-19 pandemic as the primary catalyst which entailed numerous consequences, such as:

• disruptions to supply chains;
• hindering economic growth (resulting in stagnation and inflation);
• changes in social practices and behaviors (such as remote and hybrid working, reduced business travel both domestically and internationally);
• speeding up the implementation of numerous technological solutions (quicker digitalisation).

Secondly, climate change and its related disasters, which are becoming increasingly permanent, represent another critical factor driving change. They have an immediate impact on the economic models of many countries, particularly in sectors such as transport, agriculture and tourism; they affect migration pressure and cause the rising of energy prices.

The third factor for change is the entrance of Generation Z into the labour market. This will directly lead (or rather, is already leading) to adjustments in personnel management and impetus to utilise modern technology on a broad scale.

Personally, I would identify another factor contributing to this area’s challenges: the unwarranted and seemingly irrational aggression of Russia towards Ukraine. This has resulted in the imposition of additional obstacles to international trade through a complex system of economic sanctions, impacting local labour markets in front-line countries like Poland, and causing a surge in the price of energy raw materials and a general increase in arms spending in NATO countries.

All this has led to disruption of existing world order and changes to its economy. We already saw the undermining of globalisation principles before the pandemic. For example, during the economic confrontation between the United States and China, economic tools were leveraged alongside political and regulatory ones.

Change takes the form of relocation and diversification of production locations. These processes are facilitated by Industry 4.0, but, at the same time, hindered by rising energy costs.

This has consequences from a corporate law perspective such as increase in regulatory pressure in areas like labour, international trade, energy, taxes and environmental protection. Moreover, it pushes us to act swiftly and adapt to fast-evolving demands and regulations from businesses and regulators. The number of complexities that have an impact on the environment, social issues and corporate governance – ESG are ever growing. Undoubtedly, the ESG domain is a critical factor that deeply influences our position and responsibility as General Counsels.

Therefore, what course of action should we undertake? We need to turn our attention to ESG. We must increase our regulatory oversight and broaden our mandate to address emerging risks, such as environmental concerns, employee safety, and diversity. We should also be prepared to assume accountability not only for our current responsibilities, namely law, regulations and compliance, but also for areas previously delegated to other functions, such as corporate social responsibility (CSR) or data protection. ESG issues can pose legal, financial, or reputational risks to our companies. As our core mission is to instil a sense of security, it is crucial to manage these risks proactively. The business should have confidence that we are dependable partners in this regard. To achieve this, we need to reorganise our personal work and the legal departments we manage, freeing ourselves from repetitive and tedious tasks and focusing on strategic issues. And technology is there to help!

Technological change.

I am optimistic that technology progress is going to lead us through the transition much faster than we could without it. Artificial Intelligence, machine learning, big data, social media, access to information – all this profoundly changes our world. Let us pause and reflect on what our work was like a decade ago. Although email was already in use, paper files remained the foundation. While we leveraged legal information programs, we hardly used the internet in our professional works. Do you remember how it was. Are you able to imagine to work today as it was ten years ago?

Now let’s go back even further back to the ninety eighties. In 1984, Richard L. Fisher wrote the words that I quoted in the beginning of my speech. Many of us were not even born back then. I was nine years old. Solicitors mainly used manual typewriters and no one heard of the internet. Smoking cigarettes was a thing to do in offices. Can you imagine someone lighting a cigarette at the desk next to you? I could go on. The key message is that our world has transformed and will continue to do so in the years ahead.

Sophisticated AI tools like Harvey or Casetext can assist us in drafting legal documents, opinions and contracts (but all these documents still need to be reviewed and edited by qualified lawyers). Enhanced automatic translation systems (such as DeepL) diminish the time we spend working in foreign languages. Advanced analytical systems simplify the process of due diligence. Legal workflow technologies make our lives as legal team managers much easier. Other digital systems assist us with contract lifecycle management, documentation management and IP management.

Such tools free us from administrative, repetitive, and uncreative work (which legal teams reportedly spend 50% of their time on, according to McKinsey), thereby increasing our productivity. This allows us to focus on strategic matters that require our knowledge and experience. It allows us to address new areas related to ESG, as mentioned earlier, and, ultimately, to communicate with other individuals, particularly young professionals entering the labour market.

All we need to do is allocate our resources, specifically time and money, towards digital transformation. The legal department should be prepared to hire digital experts, who are non-lawyer staff, to assist in the transformation of our teams. We must persuade business to invest more in corporate legal applications, including non-specialist technologies, which can be utilised for various purposes.

Third factor

So, I have outlined the areas of change in our profession – changes in what we do (ESG) and how we do (technological transformation). It’s now time to move on to the third element. An element that I have yet not mention and one that consulting firms omit from their reports. Why do they remain silent on these? Because this topic is challenging to quantify as it rather pertains to ethics and philosophy of law.

The third aspect of change that requires our serious attention is the widespread rise of populism. This trend is interconnected with numerous social and political factors, including the heightened polarization of societies. Additionally, it involves the erosion of authority and trust in experts (including lawyers), as well as the proliferation of conspiracy theories – as seen during the global anti-vaccination campaigns amid the Covid-19 pandemic. It is likely that each of us will be able to identify similar cases in our own industries. In my sector – telecommunications, for example the anti-5G lobby has a significant influence. I would also group the crisis of democratic institutions and the erosion of trust in the justice system, particularly the judiciary, together as similar phenomena.

What could this imply for us as General Counsel? First and foremost, there could be an erosion of trust in us as lawyers – in our expertise, our ethics and our professionalism. We, lawyers, approach issues systematically. We examine individual cases within the larger scope of the legal, economic, and social systems. We evaluate cases using legal principles, logic and ethics. That is what we were taught. And these are the very foundations of our profession. Meanwhile, populists of every kind tend to view numerous issues from an individual case-by-case perspective rather than from that of the system. They shun logic and rely instead on emotions. They do not judge matters according to universal ethical principles and classical notions of justice, but rather on the grounds of mercy and compassion.

Fortunately, business does not give in to populism, at least not to any significant extent. But business, like all other institutions, is not free from populist attacks.

As I said at the beginning of my speech, our mission is to provide a sense of security. Therefore, in our cooperation with business, we must assure that security and give our support in its battle against populism. I was touched by Philip’s Coen yesterday’s evening speech, when he underlined the importance of ethic standards to our profession, that ethics and rule of law is in DNA of our profession. And I can’t agree more with Philip, when he says that we have to be in a front line in a battle for better society. I would add that we have to be in a front line of the battle with a populism and to protect rule of law.

And we can accomplish this in only one way – by remaining true to ourselves: lawyers who are committed to ethics, integrity and continuous professional development.

[1] https://heinonline.org/HOL/LandingPage?handle=hein.journals/jlac4&div=8&id=&page=>