It was only recently when a general counsel (GC) described me as a “recovering lawyer” to his client, an American multinational setting up a subsidiary in Ireland,  that I began to appreciate fully the complexity of the role of an independent non-executive director (NED) in today’s world coupled with the expectations of the general counsel.

Retraining for the board

I have long been of the view that lawyers with their core knowledge and skills and acquired ones of facilitation, mediation, management and negotiation makes a very good NED.  But recently, on my retirement, I have formed the equally unbiased view that an independent  “recovering lawyer” can make an excellent NED, given time, retraining and a few knocks, from time to time, on the head.

Companies are slow to value lawyers

This does not, however, seem to be a generally held view.  Very few lawyers take up positions as NEDs when in private practice possibly due to conflicts within their firms. And unfortunately companies seem to be slow in valuing our talents in retirement. However, I believe that is changing with new governance rules and increasing responsibilities of the general counsel in multinationals.After almost thirty years in the business, I no longer practice as a lawyer or give any legal advice, though I seek roles as a NED or advisory board member, primarily in my comfort zone - subsidiaries of multinationals in a variety of industries, in the EU and Ireland in particular.

New opportunities

Ireland has been extremely successful over the years in attracting Foreign Direct Investment (FDI) into the country from anywhere multinationals require broader access to markets.  With increasing regulatory and cross border governance requirements for boards, increasing international powers of regulators and the resulting increased demands on the GC, the “recovering lawyer” has new opportunities.

The challenges

GCs of multinationals setting up  FDI subsidiaries, possibly for the first time abroad, regardless of the industry, are  faced with a variety of challenges in meeting clients expectations, only some of which will be met by carefully choosing the correct local law and accounting firms to assist. Indeed, as the recent survey in Global Business Post (“European GCs slam lack of client service” - 20th April 2012) shows, even a good choice there, is not the end of the story.  The GC, and indeed the success of the project, needs something more and that something more  - the right local NED - can help make the GC’s job a whole lot easier.

The problem of distance

 Ireland has built its successful reputation on the extraordinarily facilitative and cooperative nature of its environment for multinationals in the FDI area. But given the (usually) great physical and psychological distances between the new subsidiary and the parent, the importance of getting up and running quickly, and the difficulty in sending key executives overseas, a new or distracted hand at the wheel of the fledgling entity, poor communications with the parent, or unexpected delays in the start up on the administrative side caused by inexperience or lack of familiarity with the local environment on the part of the NEDs or other directors can, at the very least, delay things and lead to missed business deadlines.

Impending legislation

The law on the role, duties and obligations of a NED, though complex and evolving, is reasonably clear. In Ireland, the information can be found in the recent publication of the first of two volumes of our new draft Companies Bill  (by the way the first volume has 15 parts, 952 sections, over 1,300 pages and relates solely to a Private Company Limited by Shares, which is by far the more common corporate vehicle used by FDIs in Ireland).

One director

Among the many changes contemplated is a minimum requirement for only one director – which, it is felt, will enhance rather than reduce the accountability of the sole director. Clarifying the duty of the director is to ensure compliance with the Companies Acts, not to fetter the director’s discretion, avoid conflicts and act in good faith with regard to the company’s interests, while having regard also to the interests of the members. No pressure then.

Avoiding “group think”

Nowadays there is also a great demand for diversity on boards, not least to avoid “group think”.  Though pressure for same can be less in wholly owned subsidiaries, the parent’s policies are often pushed down throughout the group leading to a greater requirement for thought as to the background, gender, skills, psychological type, nationalities, and so on of a subsidiary’s NEDs also.  It will be interesting to see how this challenge is met in combination with the new one director minimum in Ireland.

What the GC wants

Whatever about the legal and diversity requirements of the new board, a GC wants to get the subsidiary operating quickly, efficiently and meeting the business needs.  The GC needs to know the subsidiary is being managed legally and correctly and is not running into situations that can reflect badly on him or cause issues and delays for the client.  These issues are the prime responsibilities of the local lawyers, accountants and management but a NED, familiar with these areas, used to reporting to a GC while an outside counsel, who not only speaks the same language but is also familiar with the need for regular and timely communications with the GC and other interested folks in the parent company, can progress matters smoother at the board discussion and contractual stages.  The recovering lawyer NED also understands the need to being available 24 hours during the crucial start-up phase. Hands up how many of us in private practice remember delays at closings caused by missing Directors/NEDs at the crucial moment?

An early warning system

Such a NED can at least be an early warning system, a confidence builder in the affairs of a far away subsidiary and a reassuring presence given increasing national and international governance obligations.   This is all,  of course, aside from the obvious  - that is an independent ex -lawyer as a NED can be a useful help in obtaining timely, independent, accurate and cost effective external legal advice for the subsidiary.

Adding value

Bringing legal skills to the role are a given, but the NED will also have to learn to understand better the second part of all those sections - scary to a lawyer - in the Companies Acts - the parts that say  ”…. provided however that…” and  ”…. it shall however be a defense if….” and, my personal favorite,  “…. without having reasonable grounds for that opinion….” These are the bits that actually allow a director do the job and for which the practicing lawyer needs to be “untrained”. Upon doing so,  the NED will not only add value on legal issues for the board, but will also greatly assist communications with both the outside counsel and the GC, helping keep the legal department safe and happy.

The real value of lawyers in the boardroom

GCs are skeptical of any NED who professes to know the business and its products or who looks forward to making constructive suggestions as to how to improve same. But I am learning that the challenge for the recovering lawyer as a NED is that once the business is understood better and, in particular, the NED, in taking an active and thorough role in the decision-making process, has learnt the importance of balanced views, mediation and compromise, he or she will learn to convert that past experience, knowledge and skills into real quality input to the board discussions. This should, over time, lead to a more general acceptance among executives and offices in a company of what a lawyer can bring to the boardroom table.I hope so but I am still trying to get out of the habit of defining my terms in my opening comments. All in all, it’s a journey on which I have just set out and I’ll let you know how I’m doing along the path to full “recovery”.

David Sanfey is ex-senior partner of Irish law firm A&L Goodbody and a  non-executive director of seven companies