Chief Legal Officers Gaining Influence Over Company Executives, Survey Says
The 2019 ACC CLO Survey shows that the number of top in-house lawyers who report directly to the company CEO climbed from 2017 to 2018 as companies around the world increasingly turned to their chief legal officers for help navigating new regulations, brand and reputation issues and disruptive technology.
January 30, 2019 at 04:44 PM
4 minute read
Chief legal officers are become increasingly valuable to companies throughout the world amid growing concerns about new regulations, brand and reputation issues and disruptive technology, according to the 2019 Association of Corporate Counsel CLO Survey.
The survey shows that the number of CLOs who report directly to the company CEO climbed from 64 percent in 2017 to 78 percent in 2018. It's an encouraging increase, but still not enough, according to ACC president and CEO Veta T. Richardson.
“Although this is higher than the percentage in last year's report, the figure should be at 100 percent,” she said. “When the CLO reports directly to the CEO, it demonstrates that ethics and compliance are a priority, especially in light of the growing legal, regulatory, and reputational risks facing companies today.”
Meanwhile, the number of respondents who indicated that their company's executive teams “almost always” sought their input on business decisions also increased, from 59 percent to 70 percent. Two in three CLOs reported they regularly attend board meetings, where they're commonly asked for advice on risk, compliance and corporate governance, according to the survey.
Interestingly, around 82 percent of the U.S.-based respondents said they reported directly to the CEO—the highest percentage of any country included in the survey. The majority of top lawyers who do not report to the CEO answer instead to the company's chief financial officer, according to the survey.
“This can lead to perilous situations where legal and compliance advice is not heeded at the highest levels of the organization,” the ACC report states.
While CLOs appear to be gaining influence over company execs—76 percent of respondents believed they'd made an impact on executive business decisions in 2018—they're not optimistic about securing more money for their legal departments: The number of respondents who expected budget increases dropped from 56 percent in 2017 to 45 percent last year.
Still, the survey notes that, looking at data the ACC has gathered over the past five years, “law department budgets are mainly on trend for growth.” Significantly, only 8 percent of the most recent survey takers predicted that their budgets would decrease next year—that's the smallest percentage ever recorded in the ACC CLO Survey.
The findings are based on the responses of 1,639 general counsels, heads of legal and CLOs in 55 countries who completed the survey between Oct. 14 and Nov. 13, 2018, according to the ACC.
Additional highlights from the survey include:
Nearly 70 percent of respondent CLOs said they were “very or extremely concerned” about data breaches, while 66 percent cited regulatory or governmental changes and 65 percent pointed to information privacy.
CLOs predicted that new regulations, brand reputation issues and disruptive technology would be the top issues shaping company decisions during 2019. For top lawyers at companies with more than $10 billion in annual revenue, ethics and compliance issues are expected to be among the most important challenges that they will face.
Slightly more than half of respondents expected their legal departments to send the same amount of work to outside law firms this year as they did last year, while about 10 percent expected a decrease in outside counsel reliance.
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