Being a part of your company’s broader business team is one of the fundamental components of the evolving role of general counsel (GC). Companies today turn to their GC not only for guidance regarding laws and regulations impacting business decisions, but also for business strategy itself.
The global business environment is becoming ever more complex, and law department leaders are increasingly playing an important role in high-stakes boardroom conversations that shape their company’s future. Ninety-seven percent of chief legal officers (CLOs) have reported that their company’s executive team almost always, or sometimes, seeks their input on business decisions, according to the ACC CLO 2017 Survey. Additionally, a large portion of CLOs regularly attend board of directors meetings and meet with other business leaders throughout the company to discuss operations and risk areas.
Many multinational corporations conduct business in emerging markets, which presents both challenges and opportunities as they grapple with unfamiliar cultures and laws. Regulatory or government changes ranked second on the 2017 ACC list of top issues keeping CLOs and GCs up at night in the year ahead. And as new rules and regulations are continually enacted, corporate counsel around the world are required to maintain a keen focus on which changes affect their daily practice of law and their company’s business functions.
Twenty-eight percent of CLOs worldwide stated a regulator targeted their company last year for an alleged violation of the law, and 77% handled at least one internal or external compliance-related investigation within their law department. Likewise, in the Asia-Pacific region, one in four in-house lawyers said a regulator targeted their company in the past two years, with retail trade, pharmaceutical, healthcare, energy and manufacturing being the top industries targeted. Furthermore, 68% made changes to their companies’ plans to enter a new market as a result of geopolitical events. This includes in-house lawyers working within the finance and banking, telecommunications, professional/scientific/technical services, real estate and manufacturing sectors, among others.
Not only are leaders of the legal department expected to manage situations that expose their companies to risk, they are also expected to anticipate likely perils before they transpire. CLOs are uniquely situated to work with the board of directors and senior executives on early-risk assessment and to solve business problems, foster innovation and address legal barriers.
The continued focus on mitigating risks further emphasizes how important it is for businesses to sustain robust compliance programmes in order to create and maintain effective corporate policies − a culture that encourages active employee participation in the compliance process. The ACC Law Department Management Report (2016) stressed that compliance with local laws and regulations is vital when law enforcement agencies review foreign companies’ business practices in China and elsewhere around the world. As such, companies operating in China need to regularly monitor that their policies account for new and rapidly changing regulations. And as regulations grow more complex, companies must strike a delicate and compliant balance.
While corporate lawyers across the globe are increasingly tasked with preventing and assessing risk, there is often uncertainty in foreseeing how Chinese regulators may implement new laws, and what companies need to do to comply with these new laws.
As of 1 June 2017, China’s new cybersecurity laws took effect, focusing on protecting personal information and individual privacy, as well as standardizing the collection and use of perceived information. The new law requires data localization – companies storing their data within China, and imposes security evaluations on businesses within industries such as finance and communications.
Foreign companies are uncertain as to the scope of the requirements under this new law and eagerly await further guidance from Chinese regulators. This also proves difficult with the rise of legal technology as more legal departments turn to these to increase efficiencies that could be impacted by new compliance measures. Seventy-six percent of CLOs in the Asia-Pacific region noted technology developments as extremely important in the next 12 months, CLO 2017 Survey revealed.
China also ruled earlier this year that foreign non-governmental organizations (NGOs) must register with the Ministry of Public Security or its local bureaus. Many of these organizations, though, are uncertain how strict government supervisors will be with enforcement, and the types of activities that foreign NGOs can undertake in China.
In these situations, communication with various stakeholders matters, and is paramount in order to stay informed and be successful in navigating Chinese regulations while keeping up with global developments. In-house lawyers should look for ways to effectively stay up to speed on changing laws and regulations in the region, incorporating local inside or outside counsel into their teams to promote stakeholder relations.
The business market in China continues to grow exponentially. Therefore, it is essential that in-house lawyers and their corporate law departments develop and maintain ongoing dialogue with local governing officials. This will provide regulators and in-house lawyers with greater understanding of their respective environments and challenges, to foster mutually beneficial outcomes for the government and businesses operating in China.
Veta T. Richardson is president and chief executive officer of the Association of Corporate Counsel (ACC). Deon Wong is senior legal and advocacy counsel of ACC Australia and Asia Pacific. The association has an international membership of more than 42,000 in-house lawyers at more than 10,000 organizations in 85 countries, including 72 members in Hong Kong and 238 members in Singapore.