The Age of the Chief Legal Officer

By Sherry Xu

The role of Chief Legal Officer (CLO) has been growing in importance as C-suite and board leaders become more aware of the elevated risk conditions they are working in and the long-term cost of those risks. This heightened awareness has correspondingly caused high-functioning legal teams to expand their priorities and capabilities to address broader business requirements. Due to this intensified awareness, CLOs have been given increasing authority to direct their corporate’s changing strategy and be meticulous in ensuring their business is safe from reputational and financial risks. In addition, their advice and input have become integral to business decisions and organizational strategies of expansion and cross-border business operations. According to LinkedIn Economic Graph Research, the CLO role was listed as the sixth fastest-growing designation of C-Suite hires of 2020 with 23% growth[1].

CLO or GC?

Both a CLO and General Counsel (GC) are responsible for heading up a company’s legal function, so both need solid legal backgrounds and strong management skills. In addition, both roles require the right candidate to be commercially savvy and provide business-oriented solutions.

While a GC is widely regarded as a more traditional high-level legal executive role within a company, the CLO title signals that the role is more of a top operational executive who works with other chief executives to make business decisions and formulate corporate strategies. CLOs have more opportunity to impact the business decision-making processes by regularly participating in board meetings to provide input on strategy development, governance issues and advising executives on non-legal matters, solidifying their role as an essential partner to the business. Therefore, the CLO, in general, has a more profound involvement in the business operation and a broader view of the business as a whole. It falls within the CLOs responsibility and authority to set up a business strategy in the industry to align with risk management and to generate revenue within a designated time frame strategically, which may, in turn, reflect on the company’s stock price. CLOs also take up the traditional head of legal role to build internal procedures for legal compliance and other risk control matters.

Depending on the industry and business model in many large companies, some of the risk management functions (data governance, ethics & compliance, intellectual property, safety, security, and trade compliance, etc.) may not report to GCs. However, when a business goes global or expands industry coverage, a broader corporate governance structure at the top executive level is needed. So the question is, who is in a better position to take on the head of this expanded corporate governance function? Top legal executives seem an ideal option as they come from a legal background and should have solid regulatory compliance knowledge, a successful track record of enabling business teams to achieve their business targets, crisis management capability, cross-border and international deal experience, and strong legislation knowledge and connections in jurisdictions where they are active. As a result, we witnessed more and more companies naming their top legal executives as CLOs when their businesses grow and diversify.

What makes a good CLO?

Becoming a CLO at a prominent company is not simply a matter of rising internally through the ranks or toiling away for years at a top-tier international law firm. In today’s cut-throat competitive marketplace, successful CLOs need to excel across a range of key competencies and demonstrate their ability to be a key asset to their C-suite leadership. If you are looking to become a CLO, here are four core qualities you must cultivate to be successful in the role.

  1. Cement General Counsel role initially:In a fast-paced business environment and under ever-changing regulatory scrutiny, every executive of the C-suite has to be an industry/sector expert to move quickly and make sensible business decisions at a breath-neck pace. As a subject matter expert, a successful CLO needs to be an accomplished General Counsel (& Company Secretary) with proven industry experience and solid technical skills to align legal and business strategies and ensure the legal efficiency of the corporation. Also, you will have engaged beyond your organization and throughout your industry to establish industry-wide networks. With these networks, you can work well with regulators and relevant subject matter experts. Thus, the next CLO should also be an accomplished legal tactician.
  1. Develop senior leadership skills:The skills cited as most indispensable for C-suite executives are those that constitute leadership. Today’s CLOs should be inspirational leaders who unite in-house legal functions other risk control functions , and business units to deliver in a non-authoritarian manner. Also, CLOs must be strong yet determined to set the business’s strategic goals and then inspire all employees to implement these, like all the other C-Suite leaders. CLOs also need executive courage to be confident working across and leading multiple functions and take ownership and make difficult choices and decisions when necessary. Last but not least, you have to be a visionary leader who desires to change and consistently gather information used to forecast general trends within the industry/sector.
  1. Be a strategic business partner:The CLO role isn’t just a lawyer anymore but a strategic business partner, business analyst, and risk manager on the senior executive team. The CLO must not only proactively defend the company but also grow and drive the company from a business perspective, working as a partner, rather than only an advisor, with C-suite executives to solve complex business problems and prevent potential risks. Today’s CLOs should have the ability to lead the teams and create cross-functional relationships plus displaying strong business acumen to accelerate the company’s growth. To achieve this, you must have a complete understanding of the business objectives and operations as well as institutional policies and procedures and the regulatory environment within which they operate. 
  1. Embrace changes:Change is inevitable. For example, technological advancements of recent decades have reshaped societies that vary in every jurisdiction around the world. Needless to say the consumer and technology industry, even traditional industries, such as manufacturing companies, are on the front line encountering digital challenges oriented from new technologies. Digital transformation is not just about automating the assembly line or better analysing existing data. It involves new business models and substantial changes in operations. In response to these changes, regulators in different jurisdictions will evaluate the environment and issue new laws and regulations when necessary. CLOs must have the ability/knowledge to predict legislative or regulatory trends which will come off the back of changes to ensure their businesses are protected from potential reputational, legal, financial, and other risks. In addition, on the company operational level, CLOs should establish new/enhanced risk control systems to cope with the new challenges and risks from the changes. In achieving these, CLOs need to be comfortable in embracing change and proactively leading their teams to be adaptable and forward-thinking.

[1] George Anders, “Who’s reaching the C-Suite in 2020? These 16 roles have momentum”, LinkedIn, November 2020, https://www.linkedin.com/pulse/whos-reaching-c-suite-2020-16-roles-have-momentum-george-anders/ (accessed 26 July 2021)

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Sherry Xu (Director, Hughes-Castell)
Sherry is a Director of Hughes-Castell’s Shanghai and Hong Kong offices and has recently launched a well-received interview series, Leaders in Law. She has substantial years’ experience in in-house legal and compliance recruitment in Asia and has built a strong reputation with the legal community across the region. She works closely with senior management, top legal executives, and administrative and human resources teams on developing and implementing recruitment strategies at both local and regional levels. Sherry obtained a first-class LLB degree from a top-tier PRC university and completed her LLM Degree at the Chinese University of Hong Kong.

Consultant Spotlight: Sherry Xu

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