GCs’ roles ‘becoming bigger and bigger every day’
In a time of increased regulatory spotlight and growing responsibilities for the law department, instilling a culture of good governance is paramount in keeping a business’s head above water, argue two BigLaw partners.
As has been widely reported this year, the Australian Securities and Investments Commission (ASIC) is making corporate governance a firm priority moving forward, such as in its focus on whistleblower programs or the bringing of proceedings for alleged greenwashing, including here and here.
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
Speaking recently on The Corporate Counsel Show, Corrs Chambers Westgarth partners Abigail Gill and Sandy Mak reflected on the lessons coming out of recent proceedings involving Star Entertainment, the ever-changing role of law department leaders, and changing regulatory expectations in the wake of crackdowns by the corporate watchdog.
Ms Gill – who is the firm’s head of investigations and inquiries – reflected on the “significant focus” that ASIC’s chair, Joe Longo, has on such governance matters and directors’ duties.
For general counsel, she said, this is “obviously particularly important because of the role they play both in advising their boards but also because GCs, for some time, have been recognised as officers under our Corporations Act”.
GCs, Ms Mak added, are “very cognisant” of the risks and issues that those in their position have to grapple with. What is interesting, she noted, is the fact that GCs’ roles are “becoming bigger and bigger every day” – something that is at the forefront of their minds.
“Think about the number of areas that a general counsel of a big organisation has to be across: contract management, employment issues, ESG issues, disputes, cyber and data regulatory challenges like you had in The Star’s [recent proceedings], including anti-money laundering and counterterrorism. So, the modern GC has to inform themselves on each of these topics that are relevant to their business, and they also increasingly are fulfilling all of these quasi-legal or non-legal functions like risk, business strategy and compliance,” outlined Ms Mak, who is Corrs’ head of corporate.
When it comes to managing these burdens, she said, legal competency is not enough on its own “because so many things can go wrong in so many different areas”.
When asked if now is one of the hardest times in recent memory to be a GC, Ms Mak said: “I absolutely agree with that”.
Because of the “gatekeeper theory”, “which ASIC is now promulgating”, officers and directors (including GCs) “are effectively gatekeepers” to a company’s governance, she explained, which means that their jobs are getting harder and harder.
“One of the clients that I work with has called it a whack-a-mole sort of theory: every time some issue comes up, you have to deal with that, and then you have to turn your attention again very quickly to the next issue that comes up. Trying to allocate resources, in a resource-constrained industry, is a big challenge, I think, for GCs these days,” she said.
Echoing Ms Mak’s sentiments, Ms Gill detailed the lessons arising from the recent proceedings involving The Star, prefacing her thoughts by noting that it is not enough to simply alert the board to issues.
“Where there’s potential legal risk involved and significant reputational risk, officers of the company, including the GC, have an obligation to make sure that they take swift action to remediate the problem,” she posited.
“That requires the organisation to have the right culture within their own organisation, and between management and the board, so that when an issue does arise, they can take that swift action and there aren’t barriers to resolving the problem.”
GCs, of course, have to wear multiple hats, Ms Gill continued, as advisers on legal, risk and corporate governance, among other matters.
“Sometimes, it can be very difficult for them to draw a bright line between what their role is in responding to a particular issue. Are they there effectively to be the canary in the coal mine, or are they there to give legal advice about matters?
“The blurred lines between responsibilities make it even more important that the GC sees themselves as having a key role in both ensuring that the culture within the organisation is as it should be and then in raising issues when they arise,” she advised.
Ms Mak said in support that three key features of a culture of good governance are transparency, accountability, and a continuous quest for best practice.
“In our experience, if the regulator starts looking into you and what they find is good governance, that culture of transparency, accountability and best practice, then the consequences of the finding are much more likely to be manageable, and you don’t get to the stage of the situation that you got to in the start,” she mused.
The transcript of this episode has been edited for publishing purposes. To listen to the full episode with Abigail Gill and Sandy Mak, click below: