A 2015 SURVEY GCs: Adding Value to the C-Suite
Objective NYSE Governance Services, Corporate Board Member and BarkerGilmore collaborated to survey the opinions of directors, board chairs, and CEOs of U.S.-based publicly traded companies. Specifically, the survey sought to analyze their opinions about the value of the corporate general counsel to the executive team and the company. 2015 GCs: Adding Value to the C-Suite 2
Key Findings ONE GCs today are overwhelmingly seen as valuable members of the management team, thus companies are increasingly including them in their succession plans. Compared with a decade ago, today s general counsel are much more likely to be considered key members of the executive management team. And while GCs historically have tended to exhibit stability and corporate longevity in their careers, that s no longer necessarily the case turnover is occurring as GCs become more involved in company performance and strategy and regulatory and risk management demands become more onerous. As a result, nearly 40% of the directors we surveyed serve companies that have a formal succession plan for their GCs, and 86% value the importance of a succession plan for the GC. Furthermore, when replacing a GC, directors believe internal candidates (long viewed the primary pipeline for GC replacement) should be benchmarked against external talent to determine the best fit. TWO While many of the directors we surveyed still believe GCs add value from a pragmatic perspective, they are also touting their value from a strategic perspective. Furthermore, there is ongoing disagreement on whether GCs should serve on outside boards. Just more than half of the directors we surveyed agree that having a general counsel serve as an outside director adds value to that board because he/she has experience evaluating risk on a daily basis. Yet nearly half worry that having a GC as an outside director could create internal conflict because the company already has its own general counsel. Overall, though, more than half do agree that having a GC as an outside director will strengthen a board s decision-making process. THREE The general counsel is a trusted adviser to the CEO and the board and is looked to as an ethical sounding board and monitor of best practices who isn t afraid to ask tough questions. Directors we surveyed most often look to their GCs for compliance, corporate governance, and industry knowledge; risk analysis and oversight; document management; and guidance on shareholder engagement. Directors may also consult their GCs for assistance on M&A, but are less likely to consult them on cybersecurity, social media risks, or global business issues. FOUR Directors believe general counsel would most benefit from additional expertise in the areas of cybersecurity, social media, and crisis management. Given that the directors we surveyed are far less likely to consult their GCs on cybersecurity and social media, perhaps it s no surprise that these are two of the top three areas in which directors would like to see their GCs gain more education and experience. 2015 GCs: Adding Value to the C-Suite 3
Succession Plans Does your company have a formal succession plan in place for your general counsel? Yes 38% No 59% Nearly 40% of companies have a formal GC succession plan in place. Unsure 4% 2015 GCs: Adding Value to the C-Suite 4
Succession Plans How important do you believe it is to have a regularly reviewed succession plan in place for the general counsel? Somewhat important 54% Very important 32% Most (86%) directors agree a regularly reviewed succession plan for general counsel has some level of importance. Not important 14% 2015 GCs: Adding Value to the C-Suite 5
Succession Plans If an unforeseen situation occurred with the general counsel tomorrow, how confident are you that the current succession plan could be executed without concern or undue risk to the company? Somewhat confident 42% Very confident 42% Most (84%) directors are confident that the current GC succession plan could be executed without undue company risk. Not confident 16% 2015 GCs: Adding Value to the C-Suite 6
Succession Plans When it comes time to replace our general counsel, we should: 90% Benchmark internal candidates against external talent to ensure the most qualified candidate is appointed. Directors say internal GC candidates should be benchmarked against external talent to ensure the most qualified candidate pool. 8% Only consider external candidates because bringing in fresh perspectives is a healthy practice. 2% Only consider internal candidates, because they bring firsthand experience and solid knowledge of our company to the role. 2015 GCs: Adding Value to the C-Suite 7
GCs on the Board Does your board, either currently or previously, have any members who have held the title of general counsel at some time during their career? Yes 30% No 70% 30% of directors surveyed serve or have served with a board member who holds or has held the title of general counsel. 2015 GCs: Adding Value to the C-Suite 8
GCs on the Board To what extent do you agree/disagree with the following statements: Strongly Agree Agree Disagree Strongly Disagree Having a GC serve as an outside director on a board adds value to the board because he/she has experience evaluating risk on a daily basis. GCs add value to board discussions from a pragmatic perspective. GCs add value to board discussions from a strategic perspective. Having a GC as an outside director on a board would likely create internal conflict because the company already has its own general counsel. The benefits of having a GC serve as a board member outweigh most any downside. Having a GC as an outside director would likely create roadblocks to new ideas because GCs are trained to see risk in everything. Having a GC as an outside director will strengthen a board s decision-making process. 9% 44% 39% 8% 26% 62% 11% 1% 13% 56% 29% 2% 12% 33% 46% 9% 7% 37% 44% 11% 3% 32% 57% 8% 8% 46% 36% 9% Directors agree GCs add value to board discussions from a pragmatic perspective. 2015 GCs: Adding Value to the C-Suite 9
Adding Value to Board Meetings How strongly do you agree/disagree that your general counsel adds value to your board meetings with regard to the following knowledge areas? Strongly Agree Agree Disagree Strongly Disagree Providing objective feedback for new ideas and strategies 31% 49% 18% 2% Offering risk analysis expertise 39% 51% 9% 1% Contributing to business strategy discussions 20% 53% 26% 1% Acting as an adviser to the CEO 53% 38% 7% 1% Assisting in the execution of the business plan 26% 51% 21% 2% Contributing to discussions on increasing shareholder value 20% 53% 24% 4% Acting as an objective adviser to the board 50% 44% 4% 1% Being unafraid to ask tough/sensitive questions 41% 47% 11% 1% Providing unique problem-solving skills 32% 50% 18% 1% Providing continuity during CEO and C-suite transitions 20% 50% 26% 4% Ensuring the board adheres to best practices 48% 47% 4% 1% Serving as an ethical sounding board 63% 37% 0% 0% Facilitating conversations in advance to make board meetings run smoother 30% 47% 23% 0% Directors say GCs add the most value to board meetings by serving as ethical sounding boards and monitors of best practices. 2015 GCs: Adding Value to the C-Suite 10
Rate Your General Counsel How would you rate your general counsel with regard to his/her working knowledge of the following corporate issues/areas: Excellent Good Fair Poor Compliance/ethics 79% 21% 1% 0% Crisis management 28% 58% 13% 1% Cybersecurity risk 5% 44% 47% 4% Compensation-related issues 28% 45% 25% 2% Shareholder engagement 43% 42% 13% 2% Social media risk 7% 49% 42% 3% Document retention/management 44% 49% 7% 0% Corporate governance/best practices 61% 35% 4% 1% Global business 14% 53% 28% 5% M&A 37% 47% 15% 1% Risk oversight 35% 55% 10% 0% Knowledge of our industry 43% 46% 9% 2% Directors rate their GCs highly for their understanding of compliance/ethics and corporate governance, as well as their industry knowledge, risk oversight, document management, and guidance on shareholder engagement. 2015 GCs: Adding Value to the C-Suite 11
Additional Expertise For which of the following do you believe your general counsel/legal department would most benefit from additional expertise to add more value to your company and board in 2015? Compliance/ethics 8% Crisis management Cybersecurity risk Compensation-related issues 10% Shareholder engagement 24% Social media risk Document retention/management 4% Corporate governance/best practices 13% Global business 16% M&A 13% Risk oversight 24% Knowledge of our industry 19% 30% 39% 67% Directors believe GCs would most benefit from additional expertise in cybersecurity risk. 2015 GCs: Adding Value to the C-Suite 12
Additional Corporate Roles Does your general counsel serve in any of the following additional corporate roles? Corporate secretary 89% Nearly 90% of GCs also serve as the company s corporate secretary. Chief compliance officer Chief risk officer 28% Chief audit officer 17% 0% Chief financial officer 1% Other 6% 2015 GCs: Adding Value to the C-Suite 13
Company Size What is the size of your company: 40% of directors surveyed serve companies with $1.1 billion to $10 billion in annual sales. $1.1 billion to $10 billion 40% $100 million to $500 million 23% $501 million to $1 billion 21% Less than $100 million 8% More than $10 billion 9% 2015 GCs: Adding Value to the C-Suite 14
Wrap-up Our survey results show that GCs are consistently adding value to the C-suite by supporting the CEO and, increasingly, the board in all forms of corporate governance: ethics and best practices, compliance, risk oversight, document management, shareholder engagement, M&A, and much more. Not surprisingly, as the corporate world continues to grapple with fallout in the modern cyber era, directors believe general counsel would most benefit from additional education in cybersecurity and social media, areas in which many directors are admittedly lacking in expertise. In a relatively new twist and one that is still somewhat controversial more GCs are looking beyond their own companies and taking a seat in external boardrooms as outside directors, where they are appreciated for their expertise in evaluating risk. While some directors worry this could create internal conflict and turf wars, more than half agree that having a current or former GC as an outside director will ultimately strengthen the board s decision making. Overall, general counsel are being lauded for their strategic contributions as well as pragmatic ones, making them increasingly valued members of the executive team. Methodology The survey, GCs: Adding Value to the C-Suite, was sent electronically to approximately 5,000 directors, board chairs, and CEOs of publicly traded companies in the NYSE Governance Services database. The survey was launched and fielded during the months of February and March 2015. 2015 GCs: Adding Value to the C-Suite 15
About the Sponsors NYSE Governance Services is an integrated suite of resources for public and privately held companies worldwide seeking to create a leadership advantage through corporate governance, risk, ethics, and compliance practices. NYSE Governance Services leverages the expertise of Corpedia, a leader in risk assessment and e-learning for ethics and compliance, and Corporate Board Member, a trusted source on governance matters for company directors and C-level executives at both NYSE and Nasdaq companies. NYSE Governance Services offers a range of training programs, advisory services, benchmarking analysis and scorecards, exclusive access to peer-to-peer events, and thought leadership on key governance topics for company directors and C-level executives. nyse.com/governance BarkerGilmore is recognized as a leading executive search firm specializing in Corporate Counsel, General Counsel and Compliance Officer assignments. The principals of BarkerGilmore have carved out this successful niche over the past 25 years and their dedication to this practice sets the firm apart. While the marketplace for lawyers and compliance officers continues to evolve, the impetus for companies to engage BarkerGilmore remains the same it provides the most dependable source for delivering top leadership talent. The hard measures of its operational efficiency keep existing clients returning to the firm and provide its new clients with the peace of mind of knowing the success of their search is inevitable. The firm s industry leading, audited metrics over the past three years include: a 96% retention rate of placements made, 44% of which are women, 24% ethnically diverse, a 96 day average timeframe to execute a search, and complete client satisfaction. barkergilmore.com