A Power Downshift?

Thursday, November 5, 2015 - 10:50

From March to May of this year, the Association of Corporate Counsel set out to paint a demographic portrait of the in-house community. The organization, which represents more than 40,000 in-house lawyers in 85 countries, reached out to 50,000 current, former and prospective members with an online survey. More than 5,000 responded from across 73 countries, most of them members but with a healthy percentage of nonmembers mixed in. The result, released last month, is the 2015 ACC Global Census. It is a fascinating document.

One reason is timing. ACC has done this census, with some tweaking, three times over the last decade – in 2006, 2011 and 2015. (A 2004 version was a much smaller effort.) Consider what an interesting – need I say disruptive – period that covers.

In 2006, the stubbornly persistent global downturn was, for most of us, little more than a barely audible rustling in the subprime markets. By 2011, not only had all economic hell broken loose but the so-called “new normal,” a term popularized in an ABA blog launched around that time, was hardening into a new reality.

Cut to 2015 and even the most ardent deniers of fundamental and lasting change have come around. Maybe they haven’t quite taken up the new normal flag just yet, but they have toned down their denials. Not only is the general counsel in the driver’s seat, her deputy is riding shotgun, and her growing in-house brood is wailing and whining in the backseat: “Are we there yet?”

Let’s look at the survey. The first headline, which ACC trumpets in its press release, is perhaps the least surprising. The challenges facing the in-house bar have shifted in the last five years. Of course they have. Complying with privacy laws is now the top in-house concern both within their jurisdictions (29 percent) and outside their jurisdictions (30 percent). Cybersecurity is a close second both within (20 percent) and outside (15 percent), and corruption is third, though it keeps GCs up at night far more outside their jurisdictions (14 percent) than in them (8 percent). As that suggests, geography is very much a factor driving these responses. Among counsel in Latin America and Asia Pacific, for example, corruption is a far greater challenge than in most other regions.

A second high-profile takeaway highlighted by the ACC relates to gender. In the last five years, the percentage of women responding to the survey increased dramatically and is now just an eyelash shy of 50 percent. That shows real progress in closing the gender gap, but it also brings to light a troubling underside of that progress: In-house women are substantially more likely to occupy the lower rungs of the compensation ladder than their male counterparts. As Veta T. Richardson, ACC president and CEO, puts it: “The gender salary divide was particularly stark given the nearly 50-50 breakdown of men and women respondents that we feel mirrors the overall demographics of the profession.”

Those are the headlines. Dig into the data a little deeper and it gets even more interesting. For example, what’s the state of play when it comes to the ever-swinging pendulum of in-house use of outside counsel? If 2011 marked the beginnings of a power shift, with ACC reporting a drop in the use of outside counsel and a parallel rise in corporate law department budgets, what about now?

There’s been a somewhat surprising change. Rather than the shift continuing, or even accelerating, as some have predicted, the opposite seems to be happening. “The general decline in use of outside counsel that was evident in 2011 was not uniformly present in 2015, where several areas actually saw growth in outside counsel use compared with 2011,” says the census. The numbers are small, and the time frame is short, so it’s not nearly enough to signal a new trend. It is, however, eye-opening, especially given the backdrop of steady decline in recent years.

The survey calls out a number of key areas that have reversed field after recent years of decline. M&A, for example, went from a big decline between 2006 and 2011 to a big gain from 2011 to 2015. (That may not be all that surprising given the surge in global deals and that 40 percent of the survey respondents reported their companies had experienced a merger or acquisition in the last year.) Of the three biggest areas in which in-house counsel historically have turned to outside counsel for help, litigation, always atop the list, hit a high-watermark 10 years ago at 73 percent, declined to 65 percent in 2011 and rebounded slightly in 2015 to 67 percent. IP also made a comeback, though a modest one. The big winner was labor and employment, which at 50 percent grew appreciably after years of stagnation.

Other areas, while smaller in volume, also saw changes in the use of outside counsel. Bankruptcy/creditor issues, government regulatory and ERISA/pension/benefits all dropped significantly, while tax, antitrust/trade and corporate transactions saw modest increases. The new survey also reveals a continuation of the steady decline in international work by outside counsel, which may simply reflect how international corporate counsel themselves have become, with two in three now reporting significant cross-border or multinational responsibilities.

On the career front, corporate counsel are experiencing a bit of salary stratification, with higher percentages of lawyers in the upper and lower echelons than had been the case. They also reported having a touch of wanderlust, mirroring the general mobility of our workforce. Despite superhigh job satisfaction, touching 80 percent, some two out of three in-house respondents are prepared to leave their companies if something a little better comes along.

It’s also interesting to examine how in-house counsel view the focus of their own work. Asked to identify their primary disciplines/practice areas, the biggest numbers, not surprisingly, are in areas where the work tends to stay in-house, such as contracts, which has jumped from 43 percent in 2006 to 64 percent today. That’s the top response by a wide margin. Next is general commercial/contracts, which wasn’t a category in 2011 and garnered 50 percent in 2015. (It’s not clear where the line between contracts and general commercial/contracts falls.) After that is corporate transactions, which at 40 percent hasn’t changed in a decade. And then there are the self-described generalists, which moved from 31 percent to 35 percent. Add it all up and you get a picture of the river of documents, more digital than pulp these days, coursing through most corporate law departments.

Other areas also have seen movement over the years: Compliance/ethics is up from 26 percent to 38 percent, employment/labor is up from 30 percent to 36 percent and litigation is up from 26 percent to 32 percent. The biggest jump, however, was in corporate governance. In 2006, a miniscule 2 percent of in-house counsel identified governance as their primary discipline. By 2015, that had soared to 34 percent. Also showing strong growth, though not nearly as strong, are technology/e-commerce (1 percent to 16 percent), IP (26 percent to 33 percent) and antitrust/trade (7 percent to 13 percent).

On the down side, bankruptcy/creditor issues (8 percent to 5 percent) and securities/capital markets (16 percent to 9 percent) each saw a falloff in the percentage of in-house counsel claiming them as areas of focus.

There’s one final category that’s a bit atypical in that it’s more an administrative than a legal discipline. The number of respondents naming law department management as their primary area almost doubled in 10 years from 15 percent to 27 percent. That seems like a big number, though maybe it says more about those most likely to complete a survey such as this than anything else. Then again, given the growth, and growing sophistication, of in-house law departments generally, and, in particular, the growth of the in-house legal operations function, it just may make sense.

For more about the 2015 ACC Global Census, visit the ACC website (www.acc.com), where you can grab an in-depth Executive Summary for free, or purchase a copy of the full report.