A new study from Oxford University highlights how the strategic position of in-house lawyers and the power of general counsel in Germany is changing, and how this is transforming German firms’ relationships with legal service providers.
Need to control risks
The report ‘Changing Role of General Counsel in Germany’ is published by Professor Mari Sako, Professor of Management Studies at Saïd Business School, University of Oxford. The study highlights the challenges and opportunities faced by in-house lawyers in Germany who provide service support to their internal clients, control company-wide risks and act as a business partner. Professor Sako comments, ‘while all three aspects of an in-house lawyer’s role are important, their relative importance has changed in Germany.’ He explains, ‘over the past decade a number of German companies have faced major compliance challenges, including bribery, anti-trust violations and the emissions scandal. These compliance breaches have made German business leaders realise the need to control risks better.’ Professor Sako added, ‘internal risk control has become a top management issue in German companies, and this has raised the strategic importance of the general counsel and in-house legal function.’
The directive from German firms to pay greater attention to risk control is identified in the study as the most important trigger for raising the profile of the in-house legal function. This is also why the legal and compliance functions have become more visible in German organisations. The study found that most German firms prefer to insource legal work as much as possible to achieve better risk control and greater transparency. In addition, companies are facing the ‘more for less’ challenge of increased workload without an equivalent growth in legal resources. In a move to improve service support, most in-house lawyers in German companies have systematized their relationship with law firms by establishing a panel of preferred law firms. The benefits of panels include formal law firm performance reviews and greater cost transparency from law firms by practising alternative billing arrangements. Some companies are also using boutique law firms, preferred for better focus, greater flexibility, and lower fees. The full report ‘Changing Role of General Counsel in Germany’ can be downloaded here.