FCPAméricas Blog
The Changing Role of the General Counsel … in Latin America?
3.15.2013
A recent Harvard Business Review article entitled “The Rise of the General Counsel” discusses how the role, status, and importance of a company’s general counsel has changed in the United States. It calls this “one of the most important developments of the last 25 years.”
The article discusses how the GC is now a core member of a company’s top management team. The GC offers advice, not just about legal issues, but about business ones as well. This is because businesses now possess so much risk. The article suggests that the GC has an essential role to play in assessing and managing that risk. It asserts that the GC is “now often the go-to counselor for the CEO and the board on law, ethics, public policy, corporate citizenship, and country and geopolitical risk.”
Does this observation hold true in Latin America too? As the FCPA begins to affect Latin American companies, and as Latin American companies begin to embrace compliance strategies, is the role of the GC adapting to keep up? FCPAméricas asked four prominent lawyers in the region to provide their thoughts:
ARGENTINA (Maximiliano D’Auro, Estudio Beccar Varela)
It is true that traditionally, in Argentina, the GC’s role has not been as crucial as it has been in large multinational companies headquartered in the US. A clear example of this is that, while the local GC of a U.S. subsidiary operating in Argentina is within the top management, the in-house lawyer of a comparable local company used to have a few reporting levels separating him from the CEO. That is changing rapidly. As many regional companies have gone public or crossed borders to expand their businesses, in-house counsel have grown in importance. In most large companies, the GC is now a very senior position that reports directly to the CEO and, in the case of multinational companies, to the Head or Regional GC. The GC is responsible for a growing number of areas; in addition to advising on the typical “business as usual” matters and overseeing the work of external counsel, he/she now has to deal with complex and sensitive subjects like anti-corruption, prevention of money laundering, consumer protection, privacy, environment, etc. Companies normally look for high quality lawyers with international experience to fill these roles. We have more than once seen partners of top-tier law firms quitting their seats to become GC of some of their clients.
BRAZIL (Leonardo Machado, Machado Meyer Sendacz Opice)
Global corporate scandals, such as Enron and WorldCom and the unprecedented financial crisis that occurred in the first decade of this century, has helped boost the position of the GC in Latin American companies to a position of greater seniority and relevance. These episodes reinforce the fragility that any company faces with respect to integrity in the corporate world, no matter its history, size, or power. The times are different now. The environment is changing in most Latin America countries, especially in Brazil.
The number of Brazilian companies – multinationals and others – still reluctant to make the head of legal report directly to the CEO or Board of Directors is shrinking. The ones not doing so are precisely the same corporations that insist on closing their eyes to the vital importance of legal and regulatory compliance to high performance and growth of their business. These days, just as important as monitoring cash flow and volume of sales is monitoring whether the company – through its employees or third parties – is paying bribes while conducting its business. A recent case in Brazil in which the CEO was fired for breach of integrity that was investigated internally by the local GC is strong evidence that, in many instances, the GC is assuming a starring role in top management, no longer merely reporting to the CFO.
MEXICO (Daniel Alcantara, Sanchez Devanny Abogados)
In relation to the role of the GC in Mexico, our view is that it is also evolving to a more comprehensive role as discussed in Heineman’s article, although such evolution seems not to be as dynamic as would be desirable. The foregoing might be because, in contrast to what happens in the U.S. or in the UK, in Mexico we are still working on forming a robust legal framework on anti-corruption and compliance. In addition, although the applicable Mexican laws and regulations on corporate governance have been modernized, this has happened only for certain types of entities that fall within the scope of the Securities Market Law or for certain financial institutions like banks, insurance companies, bonding companies, etc. subject to financial regulations. There is still a long way to go in terms on compliance legislation that affects the role of the General Counsel in this country.
What we see in Mexico are four different types of companies and, correspondingly, four different type of in-house counsel:
i) Multinational companies that, in general, have robust compliance programs applied in all jurisdictions where they do business, including Mexico. Hence, the role of the local in-house counsel is vital to the company’s business aims and acts as a true “gate keeper” for all business decisions within the organization;
ii) Mexican companies that are public or that are part of the financial system which also have strong compliance rules. In these types of companies, the GC is in charge of compliance matters or at least is part of the compliance committee advising the CEO or the board not only in legal aspects but on ethics and compliance as well;
In these two types of companies certainly the General Counsel plays a leading role.
iii) Mexican companies that somehow have a link to the U.S., UK or other European country (ie., as a JV partner or licensee) that apply strict rules on compliance. Such Mexican companies are compelled to comply with these rules. In our experience we have seen that the GCs for such companies must learn from scratch the applicable regulations on compliance and struggle to build and apply a compliance program in the organization. Hence, the GC’s role is more limited to general legal matters. The role is not perceived as transcendental as that of its U.S. or European counterparts. However, we have also seen that this role is evolving to be more similar to i) and ii) above;
iv) Mexican companies that have only local presence. Here, the GC advises only on legal matters since compliance matters are not an issue and are commonly overlooked. We have seen that this position commonly reports to the CFO. Therefore, sometimes it is not a decision-making position.
ECUADOR (Bruce Horowitz, Paz Horowitz Robalino Garcés)
There are relatively few General Counsel attorneys in the Ecuadorian business world. In most companies that have in-house counsel, most of those lawyers handle day-to-day legal matters, such as Employment, Merchant Contracts, and Governmental Regulatory matters. On the other hand, some Ecuadorian business and industry groups have inside General Counsels who tend to act as core members of the top management team; and the Boards and other officers of those companies go to them for guiding principles, broad legal/business overviews, and practical advice that includes the combination of business knowledge and legal expertise.
In Ecuador, GCs tend to come from respected and proven senior legal counsel positions in a corporation’s outside law firms; or they come from other corporate groups, both local companies, and multi-nationals. From what I am told, outside of coincidental social gatherings, Ecuadorian GC’s tend not to gather together collegially, perhaps because of the competition that exists and conflicts that might arise; although they tend to be consistently cordial with each other when then do meet on transactional or controversial matters.
My sense is that most GC’s of the major economic groups in Ecuador are well aware of the FCPA, and are moving toward an understanding that the FCPA and the anti-corruption laws of other nations already have. The FCPA increasingly will affect their own companies when it comes to getting international loans and guarantees, and in M&A and supply chain business. They may understand that the move toward clean corporate compliance could affect their own jobs and job futures.
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.
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© 2013 Matteson Ellis Law, PLLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
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March 19th, 2013 at 7:21 pm
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