It is rare for high-profile lawyers to rise to a senior non-legal position of their organization. Yang Guang is one of the few hybrid lawyer-CEOs, Vice President & General Counsel of Johnson Controls Asia Pacific, and formerly President-Asia Pacific at Westport Fuel Systems, General Counsel at TRW Automotive, and Vice President & General Counsel at Siemens Healthcare. Interestingly, he works in highly regulated industries (industrial manufacturing and healthcare/ pharmaceutical), where understanding and navigating complex regulatory landscapes are particularly valuable attributes. In this interview, Sherry talks with Yang Guang about the secrets of his success in both the legal and senior executive roles and his suggestions for lawyers seeking to break into the top legal and management brackets.
Sherry：Sherry Xu (Hughes-Castell, Director)
YG：Yang Guang (Johnson Controls, VP & General Counsel, Asia Pacific)
Yang Guang received a graduate degree from the University of International Business & Economics in China, a Juris Doctor degree from St. Thomas University School of Law, and a graduate degree from New York University School of Law. After graduating, he decided to stay in the US and commence his career as an associate in the tax team of a leading law firm in New York.
China’s World Trade Organization (WTO) accession in 2001 boosted China’s domestic economy and improved its trading environment, leading to an increased foreign investment influx. The continued prosperity created a huge surge in career opportunities which persuaded Yang Guang to return to China where he took an offer from China International Capital Corporation, which was a half-legal and half-i-banking role. From there, he began his in-house legal journey.
On China Shenhua Energy’s IPO project, Yang Guang closely worked with the research team, and the field visits ignited his interest in the industrial sector. It so happened that a Hughes-Castell Senior Consultant was searching at that time for a Group Lead Counsel for Siemens Group, with a focus on Siemens Financial Services (SFS) and Siemens Financial Leasing Limited (SFLL), and headhunted Yang Guang because of his strong financial background. This opportunity determined his destiny in industrial manufacturing, while also paving his path to success.
What does Legal do? – Contract Review and Negotiation
Sherry: We’ve known each other for a long time, though you’ve worked for several corporations, I remember whenever we’ve talked about your career, you always shared your experience with Siemens. I remember you said you had grown significantly in your days there, and your subsequent career development was also successfully built on the foundations of your Siemens experience. Could you share more about that?
YG: If I was to share only one career highlight, I would say it’s the High-Speed Railway (CRH) projects I participated in when I was with Siemens. Others would be the development opportunities I got outside the China region with Siemens Group, including managing the legal affairs of Siemens West Asia regions such as Pakistan, Afghanistan, Iran and Iraq. And specifically, later, I was relocated to Singapore and served as the Asia-Pacific General Counsel for Siemens Medical Diagnostics sector.
I believe that if you are an in-house counsel for an industrial business, you really should go for any opportunity to participate in large-scale projects and be a project leader if possible. It will give you a lot of exposure to real business operations, and you will find satisfaction in the business negotiation processes in the meantime. A megaproject team usually consists of several groups: some members are responsible for the supply chain; some are working on technology transfer; some are in charge of delivery and transportation; some will look after inspection and acceptance; and some are accountable for payment. If you are a project manager, you will actively participate throughout the process and help coordinate staff and internal resources. When you lead a project from beginning to end, you will have a deeper understanding of production, operation, finance, logistics, and the business as a whole by the time the project is completed.
The in-house legal functions constantly struggle to prove their value to business units, as they would always think lawyers do not understand business as well as they do. And in-house legal teams, many of them feel insecure about being a business barrier that they never are able to walk tall while arguing with aggressive sales teams. In fact, it should be the other way around if you are a business-savvy lawyer. Business teams, specifically the sales team, who are the most important revenue driver for 2B businesses, are only talking about the “sales-related” part of the entire business. Only a truly legal person can understand the whole business operation. When we have a comprehensive and in-depth knowledge of the business, we can confidently tell the business team that, “we understand how the business works as a whole (not just partially) – what benefits the company, how we make money, how the business teams’ bonus is tied to the contract execution results, which is, in turn, dependent on how a contract is drafted after negotiation”.
When I joined the project negotiations, I would ask questions boldly if I had doubts about anything in the project. Thanks to these railway project experiences, I not only gained a more comprehensive and in-depth knowledge of our transportation business but also improved my negotiation skills. Additionally, I have also developed a profound knowledge of China’s landscape, China Railway High-Speed lines, and every single train component. So, if you ask me about the first spark of my career, I will say the negotiations of the China Railway High-Speed project for Siemens, for sure. The success of its negotiations is still the primary source of Siemens’ stable profits in China.
The experience I accumulated in these projects’ negotiations can be applied everywhere, and it has benefited me throughout my career. If you ask me to summarize the key value of the legal function to a corporate, I would say contract review. I have worked in different industries and roles and found that contract review is still fundamental to my legal-oriented responsibilities. The main difference for me is, a deep understanding of business operation can enhance the impacts of contract review. Let me share with you a story:
In Siemens, an information visiting program for lawyers is open for all in-house legal counsel to visit their designated country’s legal department. There was a Swiss lawyer who came to China for an information gathering visit. He was a typical type of visiting fellow who enjoyed his visiting time’s work/life balance.
At first, we didn’t think of him as a talented lawyer, judging from typical Chinese standards. However, he was the one who saved us in the negotiations with China’s Ministry of Railways and taught us a great lesson. During the negotiations, the Ministry of Railways clung to and wouldn’t let go of our standard liability exclusion clauses. China’s in-house counsels had two terms that sounded too technical and too difficult to comprehend for us. At that moment, the Swiss lawyer calmly walked toward the blackboard in the conference room, wrote the relevant equations, and showed us the formula and calculations. His calculations proved that part of the performance of the high-speed rail programme depended entirely on the parameters of the lines, tunnels, and culverts. The production of components related to these parameters was out of Siemens’ responsibility as these were not supplied by Siemens. Therefore, of course, we should not be responsible if any problem arose from that. In the subsequent negotiations with China’s Ministry of Railways, this work/life balanced lawyer had demonstrated our rationale in a most convincing way and nobody could refute it. We successfully defended our interests in the end. When we were back from the negotiations, he gave us comprehensive explanations and guidance on each technology-related part of the Siemens standard agreement, explaining the reasons behind each clause and vividly explaining the importance of understanding the company’s business/operation. It was awe-inspiring!
Taking this as a background, I would like to talk further about a company’s standard terms and conditions.
Why are the Standard Terms written in a certain way? Wouldn’t it work if it was not written like this? What should we do if someone challenges our terms? You have to ask yourself more about these in your daily work to be prepared for a day that you are being put on the negotiation table. There was a time I helped our business team to negotiate with another company’s legal department directly for a project. At first, they got the upper hand in the negotiation because of the relative business positioning. However, it was their General Counsel who cost them the advantage. Since he did not fully understand their standard T&Cs, he could not bargain with us in the most effective way. During the negotiations, their procurement team put pressure on their lawyers, and in the end, certain terms of their standard contract were abandoned by their lawyer. As a result, we finally “won” the negotiation.
Is the General Counsel of TRW Automotive an easy role?
Sherry: The position of TRW Automotive did not seem to be as prestigious as Siemens’s job. Why did you choose to leave Siemens? What precisely was the TRW General Counsel role?
YG: I had the same thoughts here; when I first looked at the General Counsel JD, I was not very interested. At that time, the headhunter told me TRW’s President was an open-minded American lady, and she was looking for someone to help her out with partnership management.
In terms of responsibilities, it was about 15% acting as a General Counsel overseeing and providing legal advice on their COEM practice, which is the main business of China’s auto parts. I was also responsible for managing the joint ventures, anti-monopoly, and FCPA issues. The remaining time was to help the President manage any business-related fields, mainly including partner management, customer quotation analysis, and critical project review.
The lessons learned from the CEO role
Sherry: Given that you had already taken many business-related roles beyond the traditional legal responsibility at TRW Automotive when you became the CEO with Westport, what did you do, and what’s the difference from the past business role?
YG: There are four core responsibilities of a CEO:
- Vision – The CEO is responsible for the company’s strategic direction; ensure it grows in the proper direction.
- Strategy – Develop business strategies and plans that align with the vision.
- Action Plan – Lay out the next steps your business will take to achieve goals in pursuit of that vision.
- Execution of that plan.
When I was in TRW, I was in the role of advisor, assisting the President in making decisions. But as a CEO, I have to make my own decisions. Can my employees thrive? To a large extent, it depends on whether I can make the right decisions. This is probably the most significant difference.
What experience have I acquired? I believe all roads lead to Rome. Every CEO has his/her ways to success. I want to share more about the lessons I learned. Looking back now, the most significant experience I have gained that helps me a lot in my current legal work is “to know what your target audience wants.”
Many in the auto-parts business think that their primary customer is a vehicle manufacturer, but it is not. A driver or the person who runs a vehicle team is our actual customer. Let me give you an example, a foreign-manufactured and imported truck should be of high quality and have a yearly operation failure rate below 3%. But the price is three times of one of China’s domestically produced trucks (of course, the failure rate of domestically produced vehicles is higher than 3%). However, in China, the imported trucks are not necessarily more popular than domestically produced trucks; why? Do our local Chinese customers not have concerns about the quality? Of course; they do care. Are they too price-sensitive? Not necessarily. It is because the truck users only care about the result. Even if there is a malfunction in a locally produced truck, as long as there is a way to minimize the impact on the operating time, the domestically produced option is still way more cost-effective. This rationale explains why the sales of the domestically produced trucks with a higher failure rate are still outstanding, especially in the areas where well-developed highways where a vast maintenance highway network is available. It only takes a few hours to repair the out-of-order truck. The time cost is far less than the retail price of the imported truck. While users who are doing businesses in sparsely populated areas would prefer to purchase imported vehicles as it takes a longer time for the repair service team to attend to the problem, so the time cost could potentially be higher than the retail prices of imported trucks. That’s it! The working principle of our legal work is the same.
So often we, lawyers, are too entangled in something which is not what our users are most concerned about: legal teams always regard good product quality as the most important, for example, a comprehensive memo covering all aspects. However, it’s not always necessary. The need of your user business department is a workable solution, not the best available legal which may not be cost-effective for them. The business environment is fast-changing, and the pressure of sales is so intense.
The primary responsibility of an in-house legal team is to ensure the company’s business conduct is compliant with laws, rules, regulations, and policies. Of course, our mission is to help the business develop and grow, as all General Counsels would say. Are the business teams convinced that we have helped the company grow? Maybe we would hear different feedback from our users. It’s not that the in-house legal function is counter-productive, but sometimes in-house teams fail to offer business-oriented proactive solutions for business teams.
People come to in-house teams for legal advice and alternatives, but not lecturing. Also, our actual value isn’t relying on any modifications we made to our standard contract. Sales teams need the revenue to be confirmed in black and white by the contract, which should be approved by legal. The finance team may look for legal’ s endorsement for adjusting the account receivable aging, that’s why they come to us; HR may seek out the legal team when they lack legally sound reasons to fire an employee, that’s a typical senator when they need legal, etc. In helping other departments, you have to understand what their main concerns and difficulties they are facing. Don’t create a rivalry as a lawyer; it’s better to understand what business solutions they are looking for and the best result-driven business-oriented solution.
These were my biggest takeaways when I left the CEO role. I used to believe that I was a lawyer who knew the business very well. But after taking the CEO role, I felt more empathetic toward business teams as I could feel the same pressure and challenges. Many in-house legal teams think they offered business-led solutions, but they don’t. Since they have not done any business, they cannot understand sales teams’ pressure and challenges. As a senior leader from business, at year-end time if his/her team cannot meet their business targets, not only will his/her bonus be affected but the whole team’s will. Sometimes I think my previous high school textbook, Ye Shengtao’s Overcharged Three and Five Dollars[1], vividly expresses this feeling.
Back to Legal
Sherry: You returned to legal when you took a General Counsel role at Johnson Controls Inc (JCI) in 2016. What do you think is the most significant difference in how you approach the General Counsel role now from when you took your first in 2009?
YG: When I was 33 years old, I thought it was natural for any company to set up in-house legal positions. In-house legal counsels of the company do not need to prove their value. I had never thought about impacting the business as I believed the company must have an in-house legal team to focus on legal matters, and I had the authority to do this; thus, I used an uncompromising tone to push others. Now, I no longer work in this way. Legal teams can have thousands of different approaches. If your business team is super supportive and respects legal, everyone can be a good in-house legal counsel. But no matter what the environment is, there is an ultimate universal principle – the most successful General Counsel will use alliances rather than the authority to unite as many stakeholders as possible in a positive manner.
Let me give you an alliance example: sales teams usually don’t want to involve legal teams in their projects. They want to get the contracts signed as soon as possible; however, most legal teams would want to assess and analyse them carefully to control the contractual risks. Apart from resolving the present contract of a particular project, what can we do to help businesses change these kinds of opposing mindsets? For example, the current target of sales teams is the number of orders they could sign by the end of the year, determining their bonus. So they work very hard to get the deals signed, regardless of the payment terms and company profit levels; their KPI is just sales figures. So we can see the crux of the problem here. If we want to change the status quo, we must alter their KPI from pure sales figures to a more combined total package, pushing them to pay more attention to how much value the actual orders can create for the company, including profit and cash flow. Of course, sales teams are not willing to take the initiative to change the system, so we had better first reach a consensus with the finance department. Then, we need the HR department to adjust the current bonus model, increase the composition of indicators that we think align with the company’s broader interests, and reduce the proportionate influence of pure sales data. Finally, we can go to discuss the plan with the Sales Director. By doing this, we can solve the problem as quickly as possible and avoid conflicts to the greatest extent possible.
Sherry: In achieving this, there is a precondition that you have a deep understanding of your company’s business and maintain excellent relationships with various departmental heads. Apart from the role as APAC President for Westport, you have taken few senior positions in recent years. The rest are positions where people must have an immediate expectation on you, before internal trust had been established. How did you deal with these difficulties? How did you establish their trust in the success of these new originations?
YG: This is the best question of today. Trust is earned but not given. People won’t trust you simply because you have an excellent credential in your resume or you come on board with a big title and a senior ranking in the company. You need to do your job to justify it. The reason for a career move is that you assume the next place will be better than your current one. Then, why do you think they should give you something better, say a salary increment? They provide you with something better, so they would expect something better from you. So you have to make efforts to justify this.
Firstly, you have to excell in your profession, legal. Next, you should try understanding your company’s business, thus making one or two positive impacts on your new company within your expertise range, as soon as possible. And then, if possible, achieve in the area that is outside your expertise range, to impress and surprise people who were not expecting this. Since then, people will see how good you are, and they certainly want to collaborate with you.
Secondly, you have to stand firm. No one can please everyone. I didn’t become a successful General Counsel because people like me; I am a successful General Counsel because I can deliver results that no one else can. Once again, you have to take care of your team, firmly support their work, and care about their development, because they are the warriors who help you fight in every battle.
Finally, take time to take stock of a situation. Remember not to focus on short-term gains or losses. Be patient! Great opportunities will come to you in the long run as a result of changes in the organization.
Sherry: Thank you so much for taking the time to speak with me today. Your insights are incredibly inspiring to all of us.
YG: Thank you very much.
[1] Overcharged Three and Five Dollars, a short story written by Chinese writer Ye Shengtao. The novel was published in the inaugural issue of Literature on July 1, 1933. There was a bump in the Chinese grain harvest of 1932. Famers from all over the country thought that they could sell the crop at a good price, but unfortunately, the price of grain dropped to only five dollars, less than half of in the past, pushing the farmers further into poverty. The novel describes this situation.