Take Telus Corp., which has a law department of about 50 people. The company has several divisions. As well as its mobile phone, internet and TV businesses, it has a major health-IT unit, a venture-capital arm, and an international business-process outsourcing business. Each division has its own leadership team — and each leadership team has its own member of the legal department.
“They’re welcome to weigh in on anything,” Andrea Wood, Chief Legal & Governance Officer, says from Vancouver. “They’re there for their legal expertise but the expectation is that they’re also there because they’re thoughtful leaders within Telus.
“At that level they come with specific skills but they’re also expected to know enough about the businesses they support that they can offer business-savvy legal advice, and legal-savvy business advice. So they are absolutely welcome to weigh in on any significant business issues.”
Junior members of the department don’t face the same expectation. “What’s expected of them is that they become expert at navigating the legal risks. But as people become more senior in the organization, there’s no question they’re expected to think more broadly about risk and how to navigate those risks that go beyond legal.”
Wood, who sits on the executive leadership team alongside the chief executive officer and chief financial officer and others, has discovered business risk can come in unexpected forms. She places the failure of a company to change and grow high among them.
Disruptive technologies are increasingly transforming the way people do business, she says, accelerating the pace of change. That means innovation is “absolutely” something the senior leadership team is constantly thinking about.
“Companies have to embrace change, and risk is inherent in change. As in-house counsel, we have to help them do that — and make sure they can do so without running afoul of legal or compliance risk.”
Daniel Yelin, Associate General Counsel, Head of Legal Canada at Bausch Health Companies Inc., agrees with all that but he’d add in another kind of risk into the mix. Reputation risk.
In his case, it’s understandable that reputational risk is key to every business decision.
Bausch is the former Valeant Pharmaceuticals International Inc., which faced a tumultuous few years fighting an accounting scandal, and public outrage over its tactic of buying up drug manufacturers then slashing research and development while increasing the price of the target’s existing drugs, sometimes by 1000%.
At one point, Valeant was facing multiple lawsuits and US congressional and regulatory inquiries into its drug-pricing practices while struggling with US$30 billion of debt. In 2017, its stock price was down 95% from 2015.
But under new management, it sold off several companies to reduce its debt and made a commitment to limit drug-price increases. It settled lawsuits and regulatory investigations and “there was no real finding it did anything illegal,” Yelin points out.
It changed its name almost exactly a year ago. The measures seem to be working; in early May Bausch’s stock price was up 34.5% from the start of 2019.
Yelin, head of legal for Canada, has responsibility for all Canadian legal operations and is part of the Canadian management team that makes strategic business decisions.
That means he monitors business transactions, partnerships, day-to-day business affairs and tactics the company uses from a sales and marketing perspective, as well as some of the more fundamental things you’d expect any senior in-house counsel to oversee, such as a merger or acquisition or supply situation.
At part of senior leadership, he says he is welcome to weigh in on business issues.
“After what we went through a few years ago there’s very little appetite to take on unnecessary risk within the organization. As senior legal counsel we have to manage risk — and a large component of that is reputational risk as well.”
Melanie Schweizer Vice President, Legal for Bell Canada and BCE Inc., says that is exactly the area in-house counsel can deliver real value because they understand the company’s larger business strategy and concerns while keeping it on the right side of legal and regulatory requirements.
“It’s seeing the big picture — being able to address a legal question or an issue not just in a vacuum, but with backdrop of having a deep understanding of the business and the lens of the legal and regulatory framework in which we operate.”
In-house counsel who look at business issues and risk from a purely legal perspective, are not maximizing their value, she says.
“I encourage on my team to not see themselves as not just a legal adviser but really a business partner in terms of evaluating business options, risks, and strategy. I never want to hear my partners talk about giving legal advice to a client.
“My expectation is everybody is sitting at the table elbow-to-elbow with their business partners thinking through a problem with a business objective and finding a path forward that meets that objective within our legal and regulatory framework. My team should not be there or see their role in a narrow sense as traditional lawyers where a client asks a questions and you deliver a menu of options for them to chose from and beyond that, it’s a business decision as to which path they take.”
She says the company doesn’t offer its in-house lawyers specific business training, “although it’s something we’ve looked at.
“There isn’t a formal program in place but where a lawyer identifies a gap in business understanding or knowledge, for example, we’ve partnered with our finance team to help. We’ve delivered some accounting training for lawyers that I know they have benefitted from, reading financial statements and that sort of thing. On a case-by-case basis where there’s an opportunity for training we’d definitely look at it, but a lot of the training comes from being fully immersed in the business itself.”
As for whether the appetite for business risk has declined with gyrations in the stock market, the possibility of rising rates and politically fulled trade disputes, Schweizer doesn’t think so. She agrees with Wood that in the communications industry, the bigger risk is failing to evolve to keep up with disruptors to consumer habits.
The spectre of emerging and potentially disruptive technologies sometimes push her company into areas it’s not totally comfortable with, she acknowledges, saying that’s an area that is “for sure” nerve-wracking.
“There are lots of matters that are truly of technology that are truly of first impression, as well as brand new application of the law to a different technology — the kinds of issues you know that there’s probably no precedent for.
“You can’t necessarily call outside counsel and get a clear view because some issues haven’t been addressed before. You can read what the statute says but applying it to the situation is really a matter of judgment.”
When Peter Hickman, Vice-President, General Counsel and Corporate Secretary of Nalcor Energy in St. John’s, picks up the phone to call outside counsel, it’s for a very different reason.
Like most senior other in-house counsel, his role has evolved and expanded from purely legal to straight business discussions, “although whether anyone listens to me or not is a different story,” he jokes.
“It’s almost through osmosis, I suppose, you take into account commercial and business interest, and your advice would tend to be couched that way. That’s a good thing and a bad thing.
“It’s good to for your advice to be cognitive of the business interest of your client — the business, But on the other hand, you don’t want want to get caught up in it too much. You want to give them advice without trying to anticipate how it could be used. Your advice may not be as independent as it should be if you’re not careful.”
Hickman says sometimes, if he has a concern, “we’ll get an external opinion just to ensure objectivity and get a different perspective to make sure we’re not too close to it.”
When it comes to risk, he says Nalcor, a provincial energy corporation headquartered in St. John’s, Newfoundland and Labrador, has the same general business risk as any commercial energy company. It hedges against oil-price fluctuations as part of mitigating business risk, for example. But it faces an additional risk. Political risk.
In fact, the recent provincial election underscores that. The NDP vowed to scrap Nalcor as part of its platform. They didn’t win, but the Liberals and Conservatives both said they will look at the company to achieve greater efficiencies.
“For us, there’s always a risk that a change in government will lead to a change in policy,” he says. “That’s just a fact of life.”
Sandra Rubin is a Toronto writer and strategic consultant.