How the Pandemic Redefined General Counsel (GC)

Stakeholders may have granted a partial “COVID truce” in 2020, but now companies and boards face new expectations of corporate behavior. New risks for boards to consider around subjects such as equality, diversity, sustainability and relationship with governments are taking up oxygen that was previously devoted to other issues.

Often the voice of the stakeholder in the boardroom, the general counsel (GC) must work to build board oversight, skills, knowledge and processes that can guide an organization through this era of change and disruption. Throughout the month of February of this year, Gartner researchers reached 83 GC to poll their attitudes on a range of issues. Gartner experts comment on the findings below and provide six recommendations.

Consider Stakeholder Expectations Through an ESG Lens

Ninety percent of public company GC will report to the board on ESG in 2021. That represents more than those who plan to report on more commonly perceived GC issues, such as litigation, risk assessment results and regulatory changes. Over 40 percent of public company GC cited environment and corporate sustainability as one of the most important areas of board oversight in 2021. And this was before investors won seats on ExxonMobil’s board.

That is why it is doubly important that corporate ESG initiatives are much more than lip service. GC should champion ESG as the lens through which the board considers and responds to stakeholders’ corporate expectations and through which the board views stakeholder and environmental impact on strategy. Yet today, only 20 percent of companies have added ESG goals to their company’s charter, and only half of companies assess stakeholder impact of their strategy. GC, as a representative voice of the stakeholder, must hold the board to account on this.

Uncovering Disagreements Is Key to Board Effectiveness

The scale of the crisis in 2020 created a clear corporate focus to rally around. GC must strive to drive that kind of clarity in future crisis management scenarios, even when they are not so grave.

How boards cope with crisis will always play a part in which companies bounce back and which ones whither. It is not necessarily a case of avoiding differences of opinion. Rather, the GC has a role to play in working through disagreements to achieve broad consensus and tactical focus. It is also important that the boardroom itself be a place of diverse viewpoints that can lead to such conflict of opinions. Through a diverse view of an organization and its role in the world, the GC and board can anticipate and react to the many changes that lie ahead. This view is widely held by directors.

Board Refreshment Is Critical for Board Diversity

Corporate boards are making progress on diversity, and the boardroom is certainly a more diverse place than it was a decade ago, but long board tenures lead to a constrained supply of available seats. Non-executive tenures average around eight years in the United States. It is hard to change board composition when seats are not available.

Even though there is some real value to continuity, the era of lengthy director tenures may be coming to a close. The social pressure for more board diversity and the need to update skills and experiences indicate that “lifetime” appointments should not be considered a matter of course.

GC can drive board diversity by enforcing retirement ages and setting expectations for refreshment practices, such as term limits, for new, incoming directors at nomination. The board is a strategic asset and should be managed accordingly.

Move Beyond “Checkbox” Exercises for Board Evaluations

While almost all public companies and nearly half of non-public companies carry out yearly board evaluations, many (41 percent of companies) do not regularly assess individual directors or drive concrete board changes.

Without meaningful consequences, board evaluations are a “check the box” exercise. Under 10 percent of organizations declined to re-nominate a director after poor evaluation results, which calls into question what purpose they serve. Few organizations took even simple next steps, such as adding opportunities for continuing education.

When we think about GC as the voice of the stakeholder in the boardroom, we expect them to insist that board evaluations have meaning and consequence. Evaluations should drive change and be targeted to improve board functioning or fill director skill gaps. At a minimum, board evaluations should highlight director education needs.

Hybrid Boards Are Here to Stay

GC think that three-quarters of board meetings will be virtual this year. Conferencing tools have worked reasonably well, even if they sometimes fail to bring out the best of in-person discussions. Most GC that Gartner spoke to said that building a social feeling was difficult and was meaningfully hampered by technical difficulties.

While it will be hard to completely replicate all aspects of in-person meetings in a virtual setting, GC can help to mitigate this by building in networking time for informal discussion during meetings and facilitating discussion by asking three or four open-ended questions around board priorities designed to provoke discussion. If discussion lags, pose the question directly to individual directors to get things started.

It is also important to see the upside of virtual board meetings. In-person board meetings that used to take a day or more now can be spread out over the course of a week, or even longer. Virtual meetings mean that critical and more focused sessions can be held more frequently, enabling the board to stay abreast of emerging issues while providing more time for everyone to reflect after each meeting and bring new ideas to the next one.

GC need to be ready for a new reality in which hybrid board meetings persist in order to get the best from both in-person and virtual board meetings. Thinking specifically about how board oversight can be improved in either scenario, setting clear guidelines about how to improve the delivery of key information in different contexts will help improve the effectiveness of meetings and overall board oversight.

GC Board Reports Must Align to Critical Board Priorities

GC present on legal and compliance topics for around 30 minutes or less per quarter. This is a restricted time in which to cover many topics, so GC can get the most out of this time by addressing the top board priorities.

Some topics, such as ESG and risk assessment results, will naturally fall in line with board priorities. Others, such as litigation and development of the code of conduct, are legal and compliance-specific topics. GC must explicitly connect their findings in these areas to board-level priorities and goals.

Overall, GC are effective at bringing new risks to the board’s attention. Eighty-six percent of directors rate GC as effective at bringing new issues and risks to the board. This compares to 78 percent and 71 percent for the CFO and CHRO, respectively.

GC can improve, however, in guiding the board to action. Only 60 percent of board members view GC as effective at developing solutions; they trail CFOs and CRHOs in this respect. GC must command the board’s attention by clearly detailing the next steps that need to be taken. The most effective board reports are those that lead to a clear conversation about next steps.