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Is ‘Legal’ the Next Business Strategy?

gavelThe MIT Sloan Management Review asks what might be an important question for 2015: “Could your company use its legal environment to look for strategic opportunities?”

The term is “Chief Legal Strategist,” and the opportunity is intriguing.

How might a Chief Legal Strategist work? One example cited comes from the Walt Disney Company which “deployed sophisticated legal strategies to capture the profits of innovation-related activities, particularly in the field of intellectual property management.”

Indeed, when the company faced copyright expiration around characters like Mickey Mouse to Snow White, “the company transferred the value of that intellectual property into thousands of newly registered trademarks for various characters, names and images.” This move alone “facilitated the expansion of name and character merchandise licensing, which now accounts for a global, multibillion-dollar, high-profit-margin business.”

The Financial Times covered research that reviewed “how American companies performed between 2000 and 2009 – depending on whether they had lawyers on their boards or not.”

The results: Having a lawyer on board apparently goes hand in hand with differences in corporate performance, be it one of the Denver business attorneys or other legal help. Companies with lawyer directors seemed to pay their chief executives more, but have less volatility in pay, due to lower levels of corporate risk-taking and default. Litigation risk declines too: stock option backdating litigation, for example, was 94 percent lower at companies with legal directors. Conversely, when there were no lawyers on the board, there was a 308 percent increase in the effect of accounting malpractice litigation on firm value.'” This should be enough evidence to want to hire a team of lawyers to know your business is always operating inside the law no matter what, and if it’s accounting processes that could be catching so many businesses out, these businesses in question that could accidentally conduct accounting malpractice might also want to look into the services of these Tax Accountants Melbourne or other similar accounting firms.

But one challenge around establishing a Chief Legal Strategist is the need to change corporate thinking about legal’s role.

In a previous piece, Robert C. Bird and David Orozco outlined the issue: “The processes through which corporate legal departments provide competitive advantage remain poorly understood. All too often executives still view the law as a constraint on managerial decisions, primarily perceiving it as an issue of cost and compliance.”

Bird is an associate professor of business law and the Northeast Utilities Chair in Business Ethics at the University of Connecticut School of Business; Orozco is an associate professor of legal studies and MBA program director at the Florida State University College of Business. In their piece, Bird and Orozco explained how “Some companies move beyond viewing the law just in terms of compliance – and instead use their legal environment to secure a competitive advantage.”

To create such a role, the authors suggest that the CEO and General Counsel identify a separate person to think largely about “legal strategies that generate business opportunities.”

This person, often referred to as a chief legal strategist, “should be empowered and provided with the support and resources necessary to champion high-level strategic efforts within the organization.” The qualities required include:

  • Both a strong legal fluency and a strong business fluency
  • Deep operational business experience gained through managerial rotations
  • Strong financial literacy
  • Creative problem-solving capabilities
  • Effective communication skills and team-building capabilities
  • A track record of business leadership
  • The capability to execute strategies
  • A change-agent mentality