Veta T. Richardson, President & CEO of the Association of Corporate Counsel (ACC) spoke with Legal Executive Institute about the ACC’s recently released Chief Legal Officers (CLOs) survey, which showed, among other interesting items, that more than one-in-four general counsels are dealing with data breaches.
LEI: Your survey showed 27% of CLOs and GCs work at organizations that have experienced a data breach within the past two years. And among companies with more than $4 billion in revenue, that percentage grew to more than 50%. Is this something new?
Richardson: CLOs told us the number one issue that was keeping them up at night continues to be compliance related topics, but this time we heard that data security and issues associated with privacy were higher top of mind. That was an interesting shift for us.
LEI: Do you think it’s that some of the massive data breaches that were in the news has pushed those fears to the forefront for CLOs?
Richardson: Yes, I think things are evolving so quickly and all companies are viewing themselves as somewhat vulnerable. Boards of Directors are seeing the big headline news and the impact that it has on share price and on customers. As a result, Boards are asking their legal departments more questions about data security and readiness to respond to a crisis if and when one hits their company.
LEI: Did fears of data breaches push out all other concerns for CLOs?
Richardson: Oh no, compliance concerns definitely remain top of mind. However, I think like that GCs have now been living in this super-regulatory environment for so long, unfortunately, they’re starting to get a little bit more used to it. Perhaps that’s why data security fears—which is something that has become more prevalent as more companies are under attack—rose so close to compliance in this year’s survey.
LEI: Another issue the survey revealed was about diversity gaps in terms of GC compensation. Your survey showed that more than one-third of male CLOs reported total compensation packages of more than $400,000, while only one-quarter of female CLOs reached that number. Was that a surprise?
Richardson: This is the first year that we asked this question in ways to break down the data this way, so this is new information. But, no, it wasn’t a real surprise.
The legal industry, being like most professional service industries, unfortunately sees women GCs and other underrepresented groups—basically non-majority males—compensated less than their male GC counterparts.
LEI: The survey also found the use of Alternative Fee Arrangements (AFAs) among CLOs increasing, with 72% of respondents using AFAs now. What do you attribute to this growth?
Richardson: We believe the growing attention to use of AFAs is really a reflection of the increase business savvy of in-house counsel. GCs and CLOs are looking at all processes for more of a project-mounted basis to determine where they can become more efficient, lower costs, and improve predictability of result.
Because they’re looking at things with more of a business analytical lens, in addition to their strong legal ability, we’re seeing AFAs becoming a priority, and GCs feeling a lot more confident and comfortable to challenge the status quo.
LEI: How about CLOs’ perception on the general state of the legal marketplace? Are they still feeling economic pressure from the top?
Richardson: I do believe that things are relaxing a little bit in terms of budgets, because what we did hear is that GCs are not now feeling as much pressure to continue to cut costs. Nearly two-thirds said they don’t plan to change staffing and budgets, but where they are changing they’re making the decision to increase their in-sourcing and their internal spend—not their external spend with outside counsel.
LEI: Not the best news for large law firms. But what are GCs looking for with increased internal spending.
Richardson: What we’re seeing is that there’s definitely an increase in hiring for in-house counsel positions. More GCs and CLOs are tending to allocate internally because they realize that by increasing their internal staff they now can get high-quality people who really know the business, and who can really get in there and craft more personalized legal solutions for the company. As a result, GCs can really build the law department that can work closer with management as a partner to achieving results.