Banking giant Wells Fargo fires 5,300 employees for opening fake accounts, which would later cost the CEO his job. Stadium caterer Centerplate fires its CEO after elevator video surfaces showing him kicking a dog, but not before the matter is painfully stretched out over days amid much second-guessing and threats of food boycotts. Soccer giant FIFA finds itself embroiled in bribery allegations over the World Cup. The Russian Olympic federation engages in mass doping.
What do these seemingly disparate scandals have in common? At the centre of their storm is some form of alleged bad conduct by key actors in the organization, showing critical ethical lapses that exposed their organizations to risk.
“Conduct risk” is quickly emerging as a leading threat in-house counsel and their C-level executives must manage. It comes at a time when regulators, legislators and a grumpy public are aiming their arrows at what seems to be a growing phenomenon of bad behaviour across both corporate and public institutions.
Ask Nikki Latta about the biggest change in her nine years of practicing in-house at the consulting giant Deloitte LLP, and the Assistant General Counsel says it is the focus the firm’s clients are placing on cyber security and protecting their IT systems from unwanted intrusions.
“What we are seeing is that clients want to understand what security protections are in place with respect to the information they are sharing with us and with respect to the access they are providing us to their networks. They want to know who they are dealing with…so they can satisfy themselves that they are in good hands.”
Part of Latta’s job is to facilitate the negotiation of large IT outsourcing contracts, which drives part of Deloitte’s consulting business, so she has had a front-row seat to the emergence of cyber crime as a major issue facing businesses.
In late 2014, TELUS Corporation was looking to implement more cost controls across its business units and identify efficiencies it could bring to bear in its operations, including legal services. It fell on the shoulders of Michel Belec, Vice President of Legal Services; and Alan Dabb, Vice President of Litigation, to figure out what that meant for the corporate law department. But before they could begin, they had a problem common to many large organizations in Canada: legal spending was fragmented and distributed across the organization. Figuring out the total legal spend would not be an easy operation.
“Not all of the external legal spend was concentrated in the corporate law department,” Dabb explains. For example, the labour, regulatory and tax teams had their own external legal spend, which was outside the corporate law department. “Our objective was to look at the overall external counsel spend to try to come up with some efficiencies to make sure that we were spending our dollars in the right places and getting maximum bang for our buck.”
What they found was that TELUS had an unwieldy 59 law firms on retainer, conducting a wide variety of work. “Some we used more frequently than others,” notes Belec. This meant different retainer agreements and work processes were in place for each of the law firms TELUS dealt with.
The duo saw it as an opportunity to use a Request for Proposal (RFP) process to refresh TELUS’s external counsel program in order to not only get a better handle on legal spending, but—equally important—find ways to standardize the way it worked with law firms, identify administrative efficiencies, and bring additional value-added services to the company for its legal spend.
When Mirko Bibic left private practice to join Bell Canada Enterprises (BCE) as a regulatory lawyer, little did he know that one day he would be playing a key role in the government and public relations efforts of his company.
During his 10-year rise to Chief Legal and Regulatory Officer, and Executive Vice-President of Corporate Development, Bibic acted as spokesperson at times, and became the corporation's public face at the Canadian Radio-Television Commission (CRTC), BCE's primary regulator. As part of the deal-making team, he would often be dragged into media and investor relations issues. Now, his responsibilities include both legal and government affairs.
Reputation risk driving change
Bibic says one of the biggest changes he has seen in corporate boardrooms since joining BCE is the attention being paid to risk. “Ultimately, it comes down to reputation risk and brand risk.”
It’s forcing chief legal officers and their corporate law departments to garner a better understanding of things like media, public relations and government affairs.
A decade ago, he says, reporting on regulatory matters at the CRTC was “fairly esoteric,” and if there was mainstream media coverage of an issue, it played out over time. However, with the rise of a 24-hour media cycle, and an increase in media outlets and instantaneous coverage, it has changed the way companies must manage their corporate reputation. Something that might not have garnered traction a decade ago can go viral on the Internet in a matter of minutes.
When Adrian Lang left the comfortable confines of a Bay Street law firm to pursue an in-house litigation job at the Bank of Montreal slightly more than two years ago, she quickly concluded that lawsuits were the bane of the bank’s existence.
“You don’t want to be in litigation with your customer,” says Lang, Associate General Counsel at BMO. “That’s not a happy place for anybody.”
So Lang’s attention turned from litigation pursuit to litigation prevention: “The real value is making sure litigation doesn’t come up in the first place.”
She implemented a number of changes at the bank to rein in litigation costs and help nip cases in the bud before they become a bigger litigation headache.
“What we quickly realized is that when cases get to court or in the court system, they will languish for long periods. That’s not where we want to be,” says the affable Lang. “We don’t want it to be a difficult process. We want to make it more streamlined and get to a resolution more quickly.”