{"id":5014,"date":"2022-11-28T14:28:12","date_gmt":"2022-11-28T19:28:12","guid":{"rendered":"https:\/\/journals.law.harvard.edu\/hblr\/?p=5014"},"modified":"2025-02-27T21:37:54","modified_gmt":"2025-02-28T02:37:54","slug":"sink-or-swim-bringing-corporate-legal-department-governance-into-the-modern-era","status":"publish","type":"post","link":"https:\/\/journals.law.harvard.edu\/hblr\/sink-or-swim-bringing-corporate-legal-department-governance-into-the-modern-era\/","title":{"rendered":"Sink or Swim: Bringing Corporate Legal Department Governance into the Modern Era"},"content":{"rendered":"

Technology has changed the way that we conduct business domestically and internationally, and legal departments have had to stretch to meet those repercussive demands. These demands are expansive but include automation and AI developments; corporate online presence and reputation; even larger-scale corporate transactions; and with the aftershocks of the COVID-19 pandemic, a shift in workplace norms as the boundaries between home and work continue to blur. The problem is, many legal departments are averse to structural change, and as a result, the majority are stuck in outdated governance structures that have been the norm for decades.1<\/a><\/sup>https:\/\/www.americanbar.org\/groups\/business_law\/publications\/blt\/2022\/07\/legal-tech-trends\/<\/span> But are traditional conceptions of legal department structures, and the balance of powers and work division between the CLO and other in-house counsel, efficient enough to keep up with the changing legal and technological landscape? Across industries, legal departments are faced with a fundamental decision that could determine the future success of their legal practices and the businesses they serve. Rather than ignoring the new technologies that are permeating the business world, legal departments have the opportunity to integrate new automated technologies into daily activities to shift day-to-day work away from more tedious tasks, and to reconstruct governance structures in a way that allows for a more proactive department that embraces a future of business-first, strategic lawyering.<\/p>\n

It\u2019s no surprise that the world\u2019s businesses and corporations have fundamentally changed over the past few decades. From what used to be simple proprietorships isolated from international pressures or distant consumer demands are now the corporate behemoths we know and (sometimes?) love. The growing complexity of these corporations, coupled with government attention to compliance control and increased transparency, has introduced a larger need for businesses to remain keenly aware of daily operations, regulatory compliance, internal oversight, and ethical conduct.2<\/a><\/sup>https:\/\/www.mckinsey.com\/industries\/financial-services\/our-insights\/four-imperatives-for-the-next-generation-legal-department<\/span> Cue: the quintessential legal department, loaded with lawyers in charge of complicated contracts, compliance policies, and a changing landscape of laws and regulations domestically and in international markets.<\/p>\n

The evolution of corporations has not slowed down\u2014rather, with the explosion of Silicon Valley came even larger, robust, and complex tech companies in a relatively new industry that is ripe with government scrutiny and fast-paced regulatory changes. Businesses are steadily taking advantage of new technology to streamline day-to-day operations, meet new consumer demands, and continue to expand territory and profits. Unfortunately, legal departments have not followed the same trend. Despite digitization transforming the rest of the company, legal departments remain almost a relic of the past, keeping with rigid governance structures and choosing to not lighten the burden of tedious tasks by using new technologies.<\/p>\n

As we exit the second year since the COVID-19 pandemic began, legal departments could find themselves perfectly positioned to take uncharacteristically large leaps to embrace the modern, flexible, and digitized practices of the 21st<\/sup> century. The question is, will departments take the opportunity to do so? If they did take efforts to embrace modernity, it could be key in attracting and retaining young talent and best supporting their organization. Not only are these changes in legal departments\u2019 best interest, but for many, an updated way of working is deemed necessary. Corporate legal departments are increasingly being asked to reduce costs, increase efficiency, and transform from something of an internal law firm to a blended legal\/commercial arm that drives economic value for the business.3<\/a><\/sup>https:\/\/www2.deloitte.com\/content\/dam\/Deloitte\/us\/Documents\/finance\/us-advisory-legal-department-of-the-future.pdf<\/span> Gone are the days of rigid department silos and governance structure\u2014to keep up with the growing business demand, lawyers and legal departments are going to have to become something of business partners, embedded and able to work across units and specializations.<\/p>\n

So what can legal departments do to embrace the modern era? There are scores of emerging technology that can be employed to reduce the load of traditional, time-sinking tasks: artificial intelligence technology to perform highly detail-oriented tasks such as identifying patterns within volumes of text and voice conversations; cloud technology to lessen the need for in-house storage and simplify file-sharing; blockchain to ensure secure design and automation of contracts and disputes; automation to perform tedious research, document review, or e-discovery; and analytics to assist in business intelligence and operational strategy for easier compliance.<\/p>\n

Of course, anytime there are discussions of implementing technology to automate certain detail-oriented and perhaps lower-level tasks, there is a fear of what the implications are for the lawyers whose jobs the robots seem to be replacing. Admittedly, the tedious tasks that artificial intelligence and automation can most easily take on are those of the first- and second-year associate. However, the impact on jobs need not be severe at all; first, because there is no tool that could replace the subjective elements that are core to a lawyer\u2019s expertise\u2014areas of nuance, motive, risk appetite, and emotion. Second, because the shift of more burdensome tasks to technology frees up crucial space for legal departments to take the most important step in shepherding in the modern era: a fundamental shift in legal department governance.<\/p>\n

Even in the past decade, we\u2019ve seen evolutions in globalization and internal legal professional needs due to new laws and regulations, social and political changes, and the substantial reach of many modern companies. There is no doubt that the future will bring even more pressure on corporate legal departments to shed their traditional siloed service structures and decentralized delivery model in exchange for a more centralized model to leverage the new blurred lines of global and business functions. This will mean an increased reliance on and investment in legal operations, perhaps, by dedicating a formal legal operations lead role.4<\/a><\/sup>Id.<\/span> Traditionally, this role would be targeted at addressing the efficiency of the internal legal departments\u2019 operations; however, there is also room for the role to go beyond its traditional purpose to serve more broadly as the \u201cconnector\u201d between the legal department and the business operations, to help the legal department better understand the business and vice versa. The focus on developing a robust legal operations position coupled with the centralization of separate and siloed legal teams can help move legal departments away from the role of a completely reactive entity, and instead shift the department to become more proactive, strategic, and integrated members of their corporate community.<\/p>\n

From a pure governance standpoint, there are also opportunities for legal departments to make internal organizational changes to better fit the delivery model of the organization they serve. For example, global conglomerates have different needs than not-for-profit organizations. A new tech start-up won\u2019t need as rigid a corporate structure as a traditional retail seller. Despite the fundamental differences in the services that these companies may provide, many of them have the same traditional legal department structure that has permeated the corporate world for decades: a strict CLO position with separately functioning teams that hardly communicate and often function to react to any issue that arises. There is room for legal departments to shed this traditional model in favor of a more flexible team structure: sharing authority across two or three senior leaders to minimize concentration of decision-making power; breaking down traditional work silos to increase communication amongst teams; transitioning from a reactionary role to one that proactively identifies potential company risks; and integrating the legal department into the company itself to allow for more transparency and increased visibility.<\/p>\n

Of course, these changes won\u2019t be without resistance. Lawyers are famously risk- and change-averse. However, the time for acknowledging the changing needs of the modern corporate lawyer and legal department is now. Legal departments can\u2019t be the outdated, traditional feature holding back their companies from continuing to evolve and grow into the modern era. There is an opportunity to embrace technology and move corporate lawyering away from tedious, time-sinking tasks, and instead transform legal departments into strategic, process-savvy, and proactive actors within the company. If there were ever a time for lawyers to shed their infatuation with the status quo, it\u2019s now\u2014embracing technology and integration could give legal departments the perfect edge needed to keep their businesses afloat in ever-advancing markets and uncertain future.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Technology has changed the way that we conduct business domestically and internationally, and legal departments have had to stretch to […]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[22],"tags":[],"ppma_author":[379],"class_list":["post-5014","post","type-post","status-publish","format-standard","hentry","category-home"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/pgKEUK-1iS","jetpack-related-posts":[{"id":5041,"url":"https:\/\/journals.law.harvard.edu\/hblr\/strong-creditors-weak-owners-a-taxonomy-of-leveraged-finance-and-its-impact-on-corporate-governance\/","url_meta":{"origin":5014,"position":0},"title":"Strong Creditors, Weak Owners: A Taxonomy of Leveraged Finance and Its Impact on Corporate Governance","author":"cmajocha","date":"April 28, 2023","format":false,"excerpt":"I. 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