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Corporate Executive Board

Corporate Legal: Get Ready for Five Changes

By 2015, a number of legal and economic developments will change how companies assess and manage legal risks. For years, these developments have been slowly (and sometimes invisibly) gaining momentum, but the weak economy has caused them to accelerate. Now, general counsel have a choice: Sit back and watch change unfold or act now on changes already underway.

Corporate Executive Board research suggests that general counsel cannot afford to be spectators. Many of the most important changes have been gathering momentum for years. But what are these changes exactly? And what are GCs and their teams supposed to do? This is what CEB set out to determine.

CEB researchers interviewed and surveyed more than 100 general counsel of Fortune 1,000 companies. The goal was to map future developments in the law, and assess the skills needed to address them. The result was a list of five trends that will change the legal world before 2015.

1. Issues will converge; regulations will fragment.
There is current global interest in issues like privacy, corruption, governance, transparency, and intellectual property. These issues have converged in recent years, both in developing and developed nations, but the regulations relating to those issues have not. In fact, they have diverged and will continue to diverge, driven by public and media outrage of a perceived regulatory gap, protection of national interests or key domestic companies, revenue generation in an era of significant government budget shortfalls, and a preservation of regulators’ and enforcers’ power and influence.

2. Information will grow exponentially.
This has been true for a decade or more, but a different kind of information is rapidly growing now. Thanks to smart phones and sophisticated GPS systems built into our devices, our every move is tracked globally, telling others where we are and what we do. That is fundamentally different from the information explosion of the 1990s and 2000s. Corporate, consumer, and private data will become ubiquitous, which will drive disputes over the ownership and use of information.

3. Corporate transparency and privacy concerns will collide.
Companies don’t just have more information; they also have more obligations with respect to that information than ever before. Transparency and disclosure obligations have grown in nearly all jurisdictions (e.g., Dodd Frank, and similar legislation in Europe, South Africa, and beyond). But privacy and data protection issues (for example, the EU Data Protection Directive) make it often illegal for companies to disclose information. In short, transparency and privacy will increasingly be at odds with each other.

4. Legal’s center of gravity will shift.
While the general move of legal departments in the 2000s was toward the headquarters, we believe that legal departments will have to decentralize their staffing and service to mirror the general move of their companies toward emerging markets. In some industries like banking, that move is already taking place. Both legal and compliance departments are staffing up significantly away from the corporate center to deal with demands in foreign markets. As global trade rebalances away from the G8 to the G20, other industries will follow.

5. The legal services market will mature.
Legal departments are the most supplier-dependent function in companies, in contrast to other functions who outsource commodity type work. Legal typically outsources its most sensitive or important work to law firms. Now the legal services market is being disrupted by upstart law firms, non-law firm vendors, offshore options, and other market players that didn’t even exist five years ago. The effect on large law firms–on whom companies are deeply dependent–will be profound and permanent. Given the depth of key supplier dependency among major companies, this disruption should have general counsel taking notice and taking action.

To address these trends, general counsel and legal departments must consider and address the following three issues:
A) Building local legal support to address risk in emerging markets, B) investing in new capabilities beyond pure legal skills, such as technical, project management, and communication skills, and C) closing competency gaps by focusing on experiential learning and development rather than traditional training activities.

Taken together, these five forces affect where legal department resources will be allocated, and which skills and capabilities are necessary for effectiveness. By taking these steps general counsel and legal departments will enable themselves to effectively manage through the coming changes.

CEB specializes in helping companies drive corporate performance by identifying and building on best practices. The organization offers data analysis, research, and advisory services relevant to business leadership. CEB's client and member network includes 85 percent of the Fortune 500, 50 percent of the Dow Jones Asian Titans, 70 percent of the FTSE 100, and 80 percent of the DAX-30. CEB membership encompasses 50 countries, 5,300 individual organizations, and 225,000 business professionals.

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