By Stephanie Mullette, Robert E. Bostrom, National Association of Corporate Directors (NACD), Abercrombie & Fitch

Introduction: As the role of general counsel has evolved, they are increasingly called upon to provide corporate boards with advice on company strategy and business operations. This has led the National Association of Corporate Directors (NACD) to launch a new initiative, the Strategic-Asset GC, designed to help boards fulfill their mission of creating long-term corporate value. Stephanie Mullette, NACD’s Director of Corporate Solutions, and Robert E. Bostrom, previously a lawyer at the Federal Reserve of New York who became a partner at Winston & Strawn, SNR Denton and Greenberg Traurig, and general counsel of NatWest Bancorp, Freddie Mac and, currently, Abercrombie & Fitch, discuss below the initiative and what it takes to be a Strategic-Asset GC. Their remarks have been edited for length and style.

MCC: How did the Strategic-Asset GC initiative come about?

Mullette: Each year we look at our membership to determine how we can strengthen and tailor the support we provide. NACD has always recognized general counsel as a critical part of the membership, but we wanted to establish resources and programming relevant to how they work with the board today. That is what prompted our Strategic Asset GC initiative. NACD’s GC resources and programming recognize the board’s increased focus on legal, compliance, and ethical issues, and provide the GC with the necessary insight to support the board around those issues

Bob is part of our General Counsel Steering Committee, which we formed late last year. It is a group of about 60 general counsel nominated by Fortune 500 committee chairs who see opportunity in strengthening the partnership between the board and the general counsel. The committee will serve as a sounding board for both the general counsel and director resources and events at NACD. We are really excited to have Bob, and other progressive general counsel, involved in this initiative.

Bostrom: It’s a wonderful initiative on the part of Stephanie and the NACD, who’ve always done a great job of involving general counsel in the thought leadership process. This is a more institutionalized way of stimulating thought leadership at a critical time for the role of the general counsel given the increased attention being put on the general counsel as gatekeepers by the regulators and the leadership role in compliance, ethics, risk management and crisis management that general counsel are now playing. The evolution of the role over the last 20 years has been quite significant. It’s important that Stephanie and the NACD are getting this group together to focus on these issues.

MCC: Bob, you’ve been GC of some interesting companies at interesting times. Obviously, you’ve been successful – a model of a strategic-asset GC. Give us a sense of the challenges you’ve faced and how you’ve approached the GC role during a time of significant evolution.

Bostrom: I distinguish between the clear day and the stormy day. On a stormy day, when there are significant problems, it’s relatively easy for a general counsel to be strategic. The board recognizes a crisis and needs advice and counsel. The directors recognize the critical importance of legal advice and the general counsel. At times of crisis, the opportunity for the general counsel to contribute in a meaningful way is much easier and more obvious.

On a clear day, when there’s not that critical need for legal advice from the general counsel, it can become more challenging to be a strategic general counsel. It’s easy if you’re invited. It’s more challenging if you’re not. The key, on clear days and stormy days, is to learn the business and be a contributor so you’re in a position to build trust and confidence – to be a persuasive counselor. That’s easier to do on a stormy day and more challenging on a clear day. On clear days, the board is thinking about where the business is going and how it’s going to get there. A significant role for general counsel is less obvious. That’s where being the persuasive counselor, the trusted advisor, understanding the business, and being a contributor are so important. At the same time, you have to recognize that your client is the board, not the CEO. That’s one of the challenges for strategic general counsel, effectively balancing the way that a general counsel interacts with the CEO, the board and the overall management team.

MCC: That has to be tough given that boards are not of one mind. There are complex interpersonal and business dynamics at work.

Bostrom: Absolutely. The culture and dynamics of every board are different. I have managed and overseen over 600 board and committee meetings as a general counsel and corporate secretary and more in private practice. An element of that is the legacy composition of the board. Has the composition changed recently? Do you have a chairman who’s also the CEO? Do you have a chairman who’s not the CEO? Do you have a lead director? If you have a chair, CEO and lead director, it can add an element of complexity to those relationships and how you develop your role with all those constituents. Also, you can have a board with a changing composition. Freddie Mac, for example, went through several different boards while I was there, and each board had a different dynamic, culture and feel. The individual directors have different backgrounds and histories, including how they’ve relied on legal counsel in their prior iterations as CEOs or as board members of other companies. There are a lot of dynamics going on.

MCC: General Counsel have been steadily increasing their stature. They’re no longer seen as purely legal workers. They’re in the boardroom. Do you think that is a result of cybersecurity concerns? Cybersecurity is like a never-ending stormy day. Has that helped GCs establish themselves as strategic advisors?

Bostrom: It’s a very significant issue, and a very significant liability issue for boards. Cybersecurity is one of those areas where there’s a clear-cut role for a strategic GC to be proactive and take the initiative in bridging what management is doing and should be doing with what the board understands management to be doing so that the board can properly exercise its fiduciary duties in overseeing cybersecurity and IT security.

Boards are very sophisticated. They have the benefit of organizations like the NACD that help keep them abreast of current issues. In a lot of these areas, the strategic GC needs to be a business partner with the board in making sure that management is providing appropriate and adequate information about cybersecurity risk, mitigation and reporting – how often the board should be getting reports on cyberthreats and mitigation.

On a clear day, the board may want to focus on strategy and the business itself. The strategic GC can help the board focus on other areas of significant concern such as cybersecurity to make sure that there’s quarterly reporting, a management level cybersecurity committee and crisis management committee, and to assure the board that management is taking all appropriate steps to protect the company and have a response plan and protocol in place.

As you said, it’s a never-ending stormy day with respect to cybersecurity. It’s not a matter of “if” but “when,” regardless of the steps you take.

MCC: The Association of Corporate Counsel recently released its annual law department management report, which highlights the progress law departments are making in evolving from isolated, back-office legal functions to being interwoven into the strategy at most organizations. They warn, however, that GCs can’t rest on their progress but must continuously up their game and maximize the value they deliver. What can the strategic GC initiative do to help GCs not only keep their seat at the table but assure their influence is really being felt?

Bostrom: There are a couple of things. First and foremost, the lawyers need to truly understand the nature of the business and the underlying objectives and strategies of the company. General counsel need to continue to maximize their value and influence. Understanding the business comes first.

Second, the general counsel is a port of objectivity in the C-suite, a place where you can have true moral conscience. That’s not to suggest that everybody in the C-suite doesn’t have moral conscience and isn’t focused on doing the right thing. You start with the assumption that everybody is. But everybody else gets very involved in the business, and they can get desensitized. One of the ways the general counsel can bring value is to keep the C-suite sensitized about doing the right thing.

I’ve studied most of the major corporate crises from Enron and MCI WorldCom and after Sarbanes-Oxley, through the financial crisis, before and after Dodd-Frank and the continuing things that happen today. Generally, with some exceptions, it’s not bad people doing bad things. It’s good people making bad judgments and being desensitized by the exigencies of business. That’s why an important role of a GC, and one way to maximize your value and influence and be a persuasive counselor, is to be the voice at the table that says, “Just because everyone else is doing it doesn’t mean we have to.” Be the voice that says we’ve got to do the right thing. Be the voice that keeps focused on building an ethical culture. Those are easy goals for a business to espouse, but they’re hard to implement because the business is focused on making money. They are key to brand reputation.

One way the in-house counselor builds value and becomes a strategic player is to understand the business, the needs of the business, and be a persuasive counselor. You can’t be a cop. You’ve got to be able to persuade, not dictate. There are times when something is clearly illegal and you have to be more of a cop, but 99 percent of the time, you’re going to be effective and have a seat at the table if the team trusts you because you know the business, you understand where they’re coming from, and you’re able to provide an objective assessment not only of the legal compliance and ethical issues but the business approach as well. Again, you get back to the clear days and stormy days. It’s easy to get a seat at the table on a stormy day because you’re needed. The challenge is to keep the seat at the table on the clear days when you’re less critical. That’s where knowing the business, being a trusted and persuasive counselor, and asking the right questions, listening and being objective become keys to your seat at the table.

MCC: You’ve studied these crises, and they never seem to stop. There’s always the next one coming. That shows how hard it is to walk the line. It’s not nefarious people doing nefarious things.

Bostrom: I’ve identified 22 common themes in the 25 or so 2,000-page investigations and trustee reports that I’ve read about those crises. It’s amazing how consistently those 22 appear in those big reports, and they’re generally related to culture and ethical conduct and doing the right thing. They’re about being sensitized, doing risk-reward assessments, recognizing that the improbable can happen and you need to be prepared and make sure you have an environment where people and employees and associates feel very comfortable reporting up and escalating and not trying to cover up and hide. It’s incredible how recurring those 22 themes are in these large corporate crises.

MCC: What qualities do you look for in a strategic GC? What attributes do they need? You’ve described the need for a clear-eyed view of the world – knowing where the lines are. What other attributes do you look for in a strategic GC?

Bostrom: That’s one of the hardest questions you could ask. In a broader sense, I would say character, commitment and consistency. Character is the courage to advise the board or CEO when the board or CEO doesn’t want to hear what you have to say, and basing it on fact, business acumen, and due diligence, not just assertion. Second is the commitment to do the right thing and to be the voice in the room that reminds everyone to do the right thing. Consistency is about building trust and not wavering in these situations – building a relationship of trust with the board, with the lead director, with the chair and CEO, and the management team so that they have confidence in the GC and enable the GC to be the persuasive counselor. If you don’t build that degree of trust with the board and with your CEO and management team, it’s really difficult to succeed and fulfill the role of strategic GC.

MCC: It would seem that embedded in all of that is another C, which would probably be communication. Being a good communicator capable of adapting your communication style to the different people with whom you’re dealing has to be an important part of it.

Bostrom: The manner and content of your communication is critical, along with the timing and adaptability, which is a great point because, as I mentioned earlier, all boards and directors are different. You need to be adaptable to your multiple clients’ characteristics. Sometimes you have to adapt and be different with different directors on the same board. It’s not a homogenous situation where you get the trust of the board. You need to get the trust of the individual directors as well as the board as a whole.

MCC: Where do you see the initiative going in the next six months or so? From your website, you seem to have a great deal in the works.

Mullette: We’re working this year to figure out the best ways to work with and communicate with our general counsel community. We’re hoping both general counsel and directors can benefit from the resources we’re assembling and are making sure that both voices are heard at all of the events, including our webinar series. We have a live event on June 1, which will bring together general counsel, governance experts, and directors to continue the dialogue around strengthening this partnership. I don’t see this as a one-time project for 2017; this is something that we recognize as crucial to supporting our members.

Bostrom: It’s been amazing to observe the transition of the role of a general counsel and see the expansion not only of the GC’s influence but also of the role itself. For example, many GCs now have roles in the enterprise-wide risk management process, on crisis management committees, on reputation risk committees and have responsibility for compliance and ethics. They also have a much more strategic role in advising the board. At Abercrombie, I chair our crisis management committee, co-chair our enterprise-wide risk management committee, and chair our executive diversity council, in addition to having responsibility for ethics and compliance.

The broadening of the roles that general counsel play and recognition of what they can contribute outside of the pure legal box helps to develop and enhance the role of the company’s chief legal executive as a strategic general counsel to the board and to management.