Over the past 15 years, the legal concerns and regulatory requirements of public company boards of directors have drawn general counsel into the highest echelons of senior management and made them key advisers to, and educators of, the board.
These heightened duties have changed what it means to be the general counsel of a public company (and of the private companies that emulate their board governance standards).
A number of forces have come together to bring about the sea change. First, at the turn of the century came the Enron era of accounting scandals, which drew attention to the importance of properly run, independent boards. The Sarbanes-Oxley Act of 2002 (SOX) and similar New York Stock Exchange (NYSE) rules followed.
Beyond regulatory scrutiny, general counsel must guide boards through the added pressure of increasing shareholder activism and the rise of the Institutional Shareholder Services (ISS), which has aided and emboldened shareholders.
Because the general counsel’s role has evolved to become a true part of the senior business team, it is on this basis that the GC works with the board. A good example is the general counsel’s role in the focus of senior management and the board on enterprise risk management. It’s a focus that grew out of the financial crisis, both as a business imperative but also because of 2009 SEC proxy disclosure enhancements that require companies to disclose how their boards oversee risk.
Scott is not the only general counsel becoming a regular presence in the boardroom.