Part 2: The Law - Pervasion, proactivity and boundaries
The value of legal skills in an organisation
It is often felt that the skills a lawyer brings to an organisation are misunderstood and undervalued. This three-part series looks at the value of legal skills in an organisation, and the influence which you can bring to the table as a lawyer.
The first article in the series, The Lawyer: Value, Challenge and Opportunity looks at why legal skills may be misunderstood - and at the challenges and opportunity that presents. This second article, The Law: Pervasion, Proactivity and Boundaries examines the way law pervades all that the organisation does, and the options that opens up for the lawyer to be proactive. The third article, Legal Skills: The Board, Strategy, Influence and Crisis examines the value of legal skills – at the board, to the organisation’s strategic direction, and in times of crisis - highlighting opportunities for the lawyer to play a decisive role in influencing the direction of the organisation.
One of the key challenges to understanding the value of legal skills to an organisation, which we identified in the first article in this series, was the perception of others. Some colleagues – even board members – may expect the lawyer to know every element of the law as it may apply to the organisation, and being disappointed when it is necessary to call on other, more specialist resources. Others will see the lawyer as a technician, in a purely functional role which can be commoditised and reduced in cost and status.
Neither perception is true, but both exist. Behind both is the germ of an understanding that the law is all-pervasive.
Writing in 2013, the First Parliamentary Counsel noted that:
“the digital age has made it easier for people to find the law of the land; but once they have found it, they may be baffled. The law is regarded by its users as intricate and intimidating. That experience echoes observations that have been made about statute law for many years. The volume of legislation, its piecemeal structure, its level of detail and frequent amendments, and the interaction with common law and European law, mean that even professional users can find law complex, hard to understand and difficult to comply with.”
The volume and complexity of the law with which organisations must comply has since increased substantially – further complicated by the United Kingdom’s exit from the European Union, bringing with it the need to untangle more than forty years’ worth of direct and indirect legislation. Most organisations – whether corporates, statutory entities or charities - are governed by the law in almost every aspect of their business.
A number of key trends are also apparent:
- Increasing regulation. The volume of law and regulation is increasing year-by-year, whilst at the same time its complexity becomes ever-greater. Regulation through the use of statutory instruments, and statutory or non-statutory codes, is increasing. The number of regulatory bodies, and their role, continues to increase, and it is becoming more difficult even for the professional to access and define the law. By way of just one example, at the time of writing, the rules governing the transfer of data between data processors under GPDR in the UK are currently contained within a draft Code of Practice published only as a consultation paper and not yet adopted, more than two years after the Regulation entered into law.
- Increasing governance. Since the Cadbury Code on corporate governance was introduced in 1992, there have been eight separate UK reports on aspects of corporate governance. In 2017, ICSA: The Chartered Governance Institute identified that, over that period, the governance report of an average PLC had grown from 3 pages in length to 55. With subsequent governance reviews that will have grown yet further. The political response to corporate distress is, inevitably, to change the regulator and to increase governance - and that will only increase following the fallout from Covid-19.
- Increasing liability. At the same time as the volume and complexity of law, regulation and governance continue to increase, so too do the consequences of failure. With each successive change in the law, the penalties for non-compliance trend upwards, and significant penalties are now imposed for breaches of competition law, health and safety law, and data protection – to name but three. Liabilities to third parties – whether customers or competitors – have also increased – to the extent that they are material and substantial risks which are now regularly disclosable in corporate accounts.
- Increasing personal risk. The final trend is by perhaps one of the most significant. Regulators have always sought to facilitate compliance by imposing personal liability on individuals. Company directors take on significant personal risk through their corporate roles. Senior staff can find themselves subject to criminal prosecution, fines and imprisonment. Personal civil liability can accrue, with the risk of significant financial and reputational loss. Individuals can find themselves subject to lengthy and complex regulatory investigation.
The extent to which law has pervaded the operation of organisations has not always become clear to those who manage and control them. Management training and development will often touch only on specific elements; even the best MBA courses may treat law as an afterthought. If professional users – in the words of the First Parliamentary Counsel – regard the law as ‘intricate and intimidating’ then it can be no surprise that the lay manager or director must surely regard it as impossible to navigate.
The proactive lawyer can take the opportunity, not just to respond, but to be ahead of the curve. And yet, given the significant volume of work coming across the desk of most legal teams, there is a grave danger that the emphasis will be on the present – simply doing what is most urgent, at the expense of what is truly important.
A more considered strategy might include a focus on:
- History and legacy. An organisation may have historical liabilities – whether contractual or in tort, for example, relating to disease claims. Do you know what those liabilities are, where to look for them, and where you may lay off liability - for example to historic insurance policies?
- Proactive and defensive law. Is your organisation making new legacy – carrying on activities which create new liabilities and claims? Can you introduce measures to restrict or mitigate that liability – new terms and conditions, training for key staff, KPIs to highlight increasing claims trends, or involvement in strategy to allow you the organisation to change business streams?
- Horizon gazing. It’s vitally important not just to look at what new law is anticipated – but at, and over, the horizon. What are the trends which might affect your business? Will new environmental pressures impact you? Is there a new technology which will be a competitive threat? These things are critical – and the challenges they bring are legal. How can you use the law to meet them? What will your organisation need to achieve to comply?
- Introducing law to your organisation’s learning and development programme. Many organisations will have a formal learning and development programme – teaching core skills to operational staff, sales and marketing techniques to customer-facing teams, and management programmes – even perhaps organisational MBAs. Embedding relevant legal modules – for example on contract, health and safety, competition or data protection – can add real value to the organisation – and enhance the role of the legal team.
- The formal legal strategy. In the same way that the organisation will almost certainly have a strategy to define what it does, and how and why, so should the legal team. The legal strategy should encompass the risks and threats to the organisation, the legal work which exists and is anticipated, and how the team will deal with it. It should incorporate the issues of history and legacy, proactive and defensive law, and horizon gazing which we have mentioned.
A considered legal strategy should also focus mitigating the risks which the Board itself adopts, and how that might be done is reviewed further in the third article in this series.
Often in professional life, professional courtesies and conservatism mean that unwritten boundaries are in place. There can be a reluctance or reticence to challenge what another function or operation is doing – or a similar reluctance to test advice given by an outside law firm. It follows, though, that the pervasion of law into every aspect of the organisation means that – like it or not – the law has already crossed that boundary – and so must you. To realise value from your legal skills, there is no choice for the lawyer but to be interventionist and reactionary.
- Understand past and present risks and liabilities. Some constructive legal archaeology is required – perhaps with your finance, health and safety or operational teams – or by commissioning a formal legal audit.
- Look over – and beyond – the horizon. Learn about your organisation, its business, its competitors and the market in which it operates. Use your legal team and external lawyers to focus on new – and potential – legal challenges and opportunities. How can you use the law as an opportunity?
- Interact with the organisation and the board. These are core opportunities for proactivity and for using your legal skills, and will be considered further in the third article in this series Legal Skills: The Board, Strategy, Influence and Crisis.