In the latest issue of Forum magazine, Dr. Paola Cecchi-Dimeglio, Chair of the Executive Leadership Research Initiative for Women and Minority Attorneys at Harvard Law School’s Center on the Legal Profession and a senior research fellow, discusses her statistical research into the question of whether having your company’s general counsel serve on your board of directions make an impact on the company’s performance.
Does having your company’s general counsel (GC) serve on your board of directors make an impact as to how your company solves problems, strategizes and approaches diversity? Does it in fact increase your company’s revenue performance?
These are some of the questions we are seeking to answer with a new statistical study of corporate boards that include their company’s GC. The research study, due out later this year, is being coauthored by myself and Yann Cabon, a statistician and researcher with a specialty in big data and mathematical modeling.
Our study came about because we know that over the last two decades, corporate boards have undergone substantial external and internal change.
Our study came about because we know that over the last two decades, corporate boards have undergone substantial external and internal change. Thus far, however, both theoretical and empirical work have not focused on the effect of including a company’s GC on their board and how that factor impacts the performance and other abilities of its particular board structure. With this study, we are filling this gap.
We set out to determine whether there was a measurable impact when a company includes its own GC on its corporate board. We know that lawyers think differently, and they have a different way of solving problems. That is valuable for a board, even if the lawyer is not providing legal advice at the moment. Overall, the fact that GCs are all in-house lawyers will bring their values and their preferences to the board and will help move it to consider that perspective.
Also, we know that GCs are very good at bringing together opposing viewpoints and building consensus – all of which is very important for the boardroom. But next to that, GCs tend to also be very sophisticated in understanding their firm’s global outlook and how the market keeps changing, which also may bring a different kind of insight to the group.
Then there is another element that GCs contribute to, which is the diversity of the board structure itself.
In the study, we’ve included diversity in terms of gender, ethnicity and age, but also in types of skills and in the job titles that one may hold. Indeed, we are looking at the diversity of the group by examining the characteristics of an individual who is a GC and part of the board.
What we have found is that from 2006 to 2014, the number of GCs on boards increased by 11%. As the high peak of the financial crisis hit in 2008, companies with boards that included their GC were more likely to have higher revenue performance, even during this time of crisis, than the companies who did not have their GC on their board.
Corporate boards with GC vs. without GC
Our statistics show (see above graph) the outperformance of corporate boards that include their GC as compared to the performance of companies whose boards do not. In fact, you can see clearly how this trend was really formed during the financial crisis and has held strongly in place ever since, even though the performance of companies with non-GC boards has improved since the end of the financial crisis.
You can read the full article in the latest issue of Forum magazine.