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october 2011
The position of the Director of Legal Affairs
Highlighted by recent studies and referring to practices in the US and UK, the tendency has been for several years, and this has become even more pronounced in these times of crisis, to reposition the role of the Director of Legal Affairs in a company's hierarchy.
The legal function in large European multinationals is indeed becoming more a role of "General Counsel", acting early on in the company's projects and usually reporting to the company's General Management.
This is also the case in France, according to ERNST & YOUNG’s Observatory on Legal Departments, where more and more Directors of Legal Affairs report directly to the General Management and are often members of the Executive Committee and the company’s various Operating Committees.
In any case, where a relationship with the Company Secretary can be noted in certain groups, this is because the person holding the function of Company Secretary exercises responsibility for the legal function on a strictly personal basis.
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The position of the Director of Legal Affairs of a group of companies involves significant stakes; it affects the very sphere of influence of the legal function in the company..
1. A position in the top part of the company's organisation chart will make his action effective:
A close relationship with the executive officers and participation on Executive Committees enables the Director of Legal Affairs to have detailed knowledge about the business activities and projects of the company's business lines and thus to provide value added not only of a technical nature but also of a business and political nature at the early stages of any project or process.
The fact that he serves on the Committees at the same level and with the same powers as the directors of the operating divisions makes him more capable of playing a proactive, effective role in the company with full independence, and thus puts him in a position to implement the Group's legal policies and ensure that they are complied with.
2. A greater ability to spread a legal culture and to regulate risks
Similarly, the more the legal factor is taken into consideration by placing the Director of Legal Affairs high up in the ranking on a group's organisation chart, the more chance he has of taking effective action and playing a central role in managing the group's legal risks in direct liaison with the managers of the operating divisions.
It will also be much easier for him to set up a legal reporting system in the various business units, if he is working on an equal footing with the company's other divisions. This makes it possible to report information and alerts to the company's General Management directly, without any filtering.
The independence and position of the legal function are moreover becoming one of the criteria for judging the quality of internal control used by national and international regulators alike.
3. The capacity to anticipate and exercise greater influence
In addition, the higher the Director of Legal Affairs is in the organisation chart, the greater the capacity he has, through the legal watch system he sets up, to exercise an influence over his group's practices with regard to changes in national and international regulations.
Thus, by participating on the Executive Committee, he should be in a better position to apprise the company and the directors of its operating divisions of the developments in law and market trends.
Patrick Bignon
october 2011
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March 2010