TEN THINGS: ESSENTIAL ISSUES FOR IN-HOUSE COUNSEL (2021 EDITION)
Welcome back, everyone! I hope your holidays were joyful and restful (and COVID-free). I was able to make a bit of a dent in the next book, so the ABA goons are leaving me alone… for now. I did have some time to squeeze in the first “Ten Things” blog of 2021. As usual, and like I did when I was general counsel, I like to start the year by sitting back and just thinking about all the crazy shit going on out there in the world and how it might impact my company and the legal team. When I was in-house, I would use this exercise to help me plan out the year, set goals, and – most importantly – set some tripwires for starting to measure and balance risks to the organization. So, I have been reading a lot, talking with in-house lawyers, and generally trying to figure out what’s hot and what’s not. No surprise but it looks like a lot of last year’s list is still pretty relevant (click here to read the 2020 list). But, there are definitely some new players on the field. And, the idea here isn’t to figure out every possible thing that can cause problems or provide opportunity – that’s impossible (See COVID-19 for more details). Rather, it is about doing your best to find a lens to help you anticipate the problems you can anticipate so that the issues that inevitably come out of nowhere are easier to deal with or do not hurt as much. In other words, looking ahead to maximize value creation and minimize value destruction. Also, you should know that my New Year’s resolution for 2021 is to be a bit more pithy with the blog. We’ll see how long that lasts (maybe not even to the end of this one). Anyway, let’s start the car and hit the road! This edition of “Ten Things” takes a look at my predictions of the essential issues for in-house lawyers in 2021:
1. The Biden Administration. For the past four years, this spot has been held by the Trump Administration. All I’ll say about that is that it was a wild ride. For those ready for some calm, the Biden Administration is a welcome sight – even if you don’t necessarily agree with the politics. Regardless, any change in administration in the U.S. means changes on the horizon. To the extent the changes can be brought on by administrative action alone, probably big changes. To the extent the action requires the approval of the Congress, Biden will have less room to move as the 50/50 split in the Senate means he must keep all 50 Democrats aligned to pass bills (with Vice President Harris casting the tie-breaker). A split like this usually means less dramatic legislative swings. Regardless, you can count on changes as follows:
- Regulators will be more aggressive vis-a-via business and regulations will be tighter (including undoing many things the Trump administration put into place – though that typically cannot happen overnight). For example, expect a far more employee/union-friendly four years at a minimum.
- More Congressional investigations with a wide range of targets (e.g., technology, energy, financial services).
- Taxes will go up – but not “crazy” up.
- A better U.S. Postal Service.
- Climate change will be a priority and a focus.
- Foreign relations will fall back into more traditional camps of allies and enemies, meaning warmer ties with Europe and Canada and not such much with North Korea, Russia, and some places in the Middle East.
- Trade as a weapon will wane though not completely, but it will be more predictable and less likely to be aimed at traditional allies.
- A more flexible and traditional immigration policy.
- A focus on healthcare, in particular a complete “do-over” on the plan to take on the COVID-19 virus.
- Trouble with U.S. political extremists. Exercising your free speech rights in the U.S. is one thing, espousing violence, fake conspiracies, election fraud lies, and bigotry is another. Sadly, the Biden Administration (like many global governments) will have its hands full with the latter as certain politicians and hate groups continue to mine this ugly segment of America for political gains.
Overall, things will be more like they were under President Obama (and maybe even Clinton) and while many will grumble they will welcome the “certainty” Biden brings to the table after four years of… well, whatever the heck that was. As an in-house lawyer, it’s time to dust off your government affairs chops and to think hard about how changes to the things listed above impact your company – good or bad – and get active.
2. Bitcoin. Okay. I don’t know crap about Bitcoin (well, crypto-currency, of which Bitcoin is one of many). But, I know enough to know that we have probably hit the point of no return with digital currency and, not only is it here to stay, it will more and more become an acceptable method of payment and legal tender. This means in-house lawyers need to take a crash course in “Bitcoin 101” this year because at some point someone from Finance or Sales is going to tell you “We need to start accepting Bitcoin or [insert horrible tragedy here] will occur!” Think of how cool you’ll be when you go “No problem dude. I’ve been thinking about just that issue and I have some sample contract clauses worked up.” Now, the odds of that conversation going exactly as I have laid it out are close to negative four – other than the part about Sales proclaiming plagues of frogs, locusts, and hellfire visiting the earth – but you should start to bone up on Bitcoin. The answer you give may still be “this is incredibly risky and we need to get CEO/Board approval to do something like this” but ignoring Bitcoin completely is probably not the best strategy either. Here are a few articles to help you get started:
- Ten Things About Bitcoin That Lawyers Should Know (umm, not my article but an interesting title!)
- How Bitcoin Works
- Cryptocurrency – How to Survive Legal Risks and Confusing Regulations
- Can You Legally Protect a Bitcoin Transaction?
One thing you will see right away is that the ground is shifting quickly when it comes to cryptocurrency and it will be difficult to stay on the cutting edge. My advice is that if the business is truly determined to work with Bitcoin, etc., find a good CLE course or two to attend and then find yourself a law firm with the right specialists to help you figure out the risks and the best ways to protect or advantage the company. This is not an area you want to fly solo on!
3. Phishing. There are plenty of risks and issues to be watchful of when it comes to data security. But, for my (non-Bitcoin) money, the one to watch out for in 2021 is “phishing,” i.e., the risk of bad guys gaining access to the company’s data systems or treasure by duping some poor employee into clicking on a malware link in an email or tricking them into transferring a big chunk of money because the email looked “legit.” It only takes one employee not on their game to open the door to the company’s systems and pocketbook. This means one big value generator for the legal team is focusing on ways to protect the company from this risk. Phishing, in the business context, usually comes in the form of any email demanding urgent action, e.g., click on this link to prevent something bad or to confirm something good (and once you click malware or ransomware is installed), or containing instructions to transfer money (where the instructions look like they come from someone in authority). For an excellent primer on phishing, click here. This year, Legal should meet with IT Security and HR to implement the following:
- Ensure that all employees are consistently trained (and tested) on how to spot phishing emails – the bad guys are clever!
- Require lengthy passwords and two-factor authentication for all company systems. Ensure antivirus/malware software is current and updated automatically.
- Develop protocols for all employees to follow if they receive a request to transfer funds or give access to systems, i.e., ways to verify the request is real.
- Add a clause to your contracts setting forth a process that must be followed in the event a customer receives a request to change the payment process in any way – and that shifts the consequences to the party that fails to follow the protocol.
- Add a message banner that identifies any incoming emails as coming from outside the organization. This is very easy to do with Office 365 and any email that purports to be sent internally but carries this “sent from outside the organization” banner is instantly suspect.
- Regularly back-up systems and data so if your computer or systems are locked down by the bad guys and held for ransom you can still function.
- Require VPN usage for anyone accessing company systems outside the company’s internet, e.g., at a coffee shop or in an airport.
4. COVID-19 Recovery. I was asked last January if I thought COVID would be a big deal. I said, “No, it’s probably going to be just another round of the flu.” Man, was I wrong. So, I am going to correct that mistake and make sure COVID is on this year’s list of essential items. Most in-house legal departments have been heavily involved in their company’s response to the pandemic, be it general legal issues, applying for PPP financing, heading up a task force, and so forth. Basically, companies are taking advantage of all the skills that lawyers bring to the table, from managing unwieldy projects to maneuvering through uncertainty. For the rest of 2021, I think the core COVID issues facing in-house lawyers will be:
- Can you require that employees get vaccinated before returning to work? (Yes) Some companies are offering incentives to employees to get vaccinated (and be sure to note that there will be several legal “outs” for people who do not wish to get vaccinated).
- Where will people work – is remote work truly here to stay? How will that work out for in-house legal departments? (Well)
- Considering whether changes to contract templates are necessary to better respond to the “next” crisis. (Yep)
- How will business interruption insurance disputes turn out, and the same for fights over Force Majeure clauses? (Mixed)
- When will the ability to travel return and will it be the same? (Maybe – but I certainly hope so!)
- Litigation, supply chain issues, bankruptcy, general risk assessments, etc. (Yes!)
When the pandemic is over and we return to whatever “normal” is going forward, there will be an incredible amount of work for in-house lawyers. One key will be realizing that the legal team does not have to proceed alone, there are many groups within the business that will be impacted and that will have something to add to a task force or other pan-company effort. As Columbus says in Zombieland, “don’t be a hero.” Take advantage of the skills and benefit of “many hands” helping. For more, see this great article in Practical Law titled Preparing an Organization for Business Post COVID-19.
5. Big Tech. Last year I mentioned “Big Tech” in the context of antitrust investigations. That prediction turned out to be right on the money (which, in terms of this blog, means pennies). While antitrust was the core issue, as the year went on, 2020 saw Big Tech get sucked into all sorts of disputes and debates, from whether Facebook should be broken-up and previously approved mergers “undone” to Twitter’s challenges with labeling or suppressing disinformation/violent election-related messaging on its platform. Guess what? It’s not going to get any easier in 2021! Several things jump out at me as I scan the horizon:
- Continued competition law risk here in the U.S. (and around the globe) for technology companies. And not just Big Tech. If you are a technology company with a large market share in a particular market segment or country, you run the risk of finding yourself in the crosshairs of regulators or private antitrust disputes. See my post on The Sherman Act: Section 2 for more about how to protect your company.
- “Tech Nationalism” – we have seen the rancor over China-based Huawei systems and 5-G, but don’t forget the EU’s tax policies toward U.S.-based Big Tech is driving lots of angst as well. Countries will likely use their technological prowess in proxy fights or their laws (tax, trade barriers, antitrust) as weapons to target other countries’ tech giants.
- Open Internet – open internet proposals took a back seat during the Trump administration but we are likely to see them re-emerge under Biden, i.e., whether and how ISPs can discriminate or charge different rates to different providers of content. There are pros and cons on both sides, but it is worth educating yourself and figuring out which position best serves your company (see The Wired Guide to Net Neutrality).
- Section 230 – this section of the 1996 Communications Decency Act protects technology platforms from lawsuits based on the content posted by their users. There is a very good chance that Section 230 will be modified or outright repealed. If that happens, all hell will break loose on the internet (well, more hell than usual). One problem will be the law of unintended consequences, i.e., if Congress fiddles with or repeals Section 230 it is not just Big Tech that will have to live with the fallout, so will many small technology companies. The CEO of WeMe wrote an interesting OpEd in the WSJ just this week on this topic. As any media platform would be responsible for the content on its site, lawsuits and more censoring vs. less seem like the likely result.
- The tipping point on electric vehicles is here. In fact, we may have already passed it (just today GM announced the elimination of gasoline-powered cars and light trucks by 2035). While Tesla is dominant at the moment, plenty of competition is on the rise here in the U.S. (thanks to SPACs) and around the globe, in particular in China. What does this mean for your company (e.g., does it supply GM with parts for gasoline-powered cars? What’s the plan then?
- Data privacy and transfers – while laws like California’s CCPA are really aimed at Big Tech and Big Marketing, their vast sweep is creating proportionally greater headaches and cost for small companies. Trying to stay ahead of a seemingly ever-changing and often contradictory set of laws around the globe is a huge burden on small companies and their legal teams. This (sadly) is likely only to get worse before it gets better.
While it may seem like Big Tech is alone in the target zone, they are not. If you work for a technology company, or provide goods or services to one, all of the above can impact your company and your department. When you see issues regarding Big Tech pop up on your radar, parse out the information carefully to look for ways it could directly impact you.
6. U.S. vs. China. If there is one movie I am excited about in 2021 it is Godzilla vs. Kong (sorry Tokyo…). It will be an epic battle of titans. While the movie is make-believe, there is another battle of titans that will continue to play out in 2021 that is anything but fake and that is the U.S. vs. China. This fight has been brewing for a long time and 2021 and beyond will see it move to new heights, including space. The U.S. is ramping up the pressure through military maneuvers and coalition building, and what happens to the trade tariffs is anyone’s guess at this point. On the China side of the ledger, it continues to flex its military and economic might regionally but with goals to take on the U.S. globally. Just this week, President Xi told a web-audience attending the Davos (virtual) summit:
“To build small circles or start a new Cold War, to reject, threaten or intimidate others, to willfully impose decoupling, supply disruption or sanctions, to create isolation or estrangement, will only push the world into division and even confrontation.”
Yikes! To add to the highly flammable Cold War situation (mixed metaphor intentional), China recently passed the United States as the leader in foreign investment, in large part because the U.S. is lagging so far behind in its response to the COVID pandemic. What does it all mean? To me, it means continued uncertainty in the world economic order (never good for business), continued cyber warfare and state-sponsored hacks (not good either), trade wars, and potential military conflict (through proxies), industrial espionage (protect those trade secrets!), and a continued tough go for U.S. companies trying to crack the Chinese market and, in the U.S., for Chinese companies with any ties to the Chinese government (i.e., virtually all of them). It’s hard to see how any business anywhere in the world will not be impacted in some way as this battle royal plays out. So, buckle up. Fisticuffs will ensure in some form.
7. UK Post-Brexit. Living here in the U.S., the trials and tribulations of the U.K. leaving the European Union feel a little “far away.” But, smart in-house lawyers around the globe realize that this separation will have big impacts outside of Europe. Not only has COVID hit the U.K. particularly hard, but the initial separation from the EU has led to a myriad of problems and delays in the export and import of goods between the EU and the U.K., with the likely effect of reducing U.K. economic output for at least the rest of 2021. Here are just a few items to pay attention to as the saga plays out over 2021 and beyond:
- Trade agreements/export and import law.
- Competition law investigations.
- Data transfers.
- Business operations in the U.K. (and any exodus out).
- London no longer the jumping-off point for doing business in E.U.
- U.S./U.K. trade agreement (or lack thereof).
- Immigration/status of ex-pats.
- Choice of law clauses/International arbitration.
- Enforcement of judgments.
- Intellectual property rights and protection.
- China/U.K. relations (and impact on U.S. and others).
- General malaise in the U.K. economy (including specific industries like automobile manufacturing).
8. Diversity. It feels like 2021 may be the breakthrough year on diversity issues – certainly here in the U.S. Many in-house legal departments require diversity from their law firms as table stakes to get hired (and that’s a good thing). The NASDAQ is looking to require diversity statistics and explanations of lack of diversity on the board of directors to list on its exchange. Many businesses are working to close gaps in pay and trying to make their workforce (and senior management) look more like their customers. Not only is this good policy, it is good for business with companies that have diverse workforces and teams producing 20% to 30% more revenue than those companies with more homogeneous workforces. I can tell you first hand that having a legal team comprised of different sexes, colors, religions, and cultures produces a far superior work product than one where everyone’s “the same.” That “sameness” tends to produce groupthink and groupthink is a recipe for disaster in a legal department (and a company in general). It leads to bad decisions, bad behavior, and bad results. As in-house lawyers you can truly drive change and, regardless of the size of the team, there are many things you can do to build a better department and a better company – with the result being better financial results and a far more interesting work environment. Start small – hire a diverse law firm, form a company diversity committee, look to hire team members that add to your department culture with their brains and their differences. Make 2021 the year you do something real about diversity.
9. Meet the New Boss. There was a fascinating article in the January 12, 2021 edition of the Wall Street Journal titled Your Next Boss: More Harmony, Less Authority. The gist of the article is that the old-style “boss” as someone with technical expertise to teach and manage teams will go by the wayside. The “new” boss will focus on coaching and nurturing employees and helping them navigate the organization – a changeover the has gathered strength as work has shifted to remote work due to COVID. From the article:
“And as the conditions under which the boss operates have shifted—fewer managers, more reports, less administrative work—a new model is emerging. This boss is a coach, not a dictator; a mentor, but not necessarily because of experience with sales or programming. Where previous leaders may have sought to stand out, these managers excel at fostering collaboration. It is possible they will be younger than you are, with less industry experience.”
Even though I am a bit grizzled, my experience backs this observation and impending sea-change. Not only has remote work accelerated this trend, but the new generation of workers (Generation Z and the soon to be transformative Generation Alpha) demanding this type of management, and the fact that older, very experienced workers will be a big part of the workforce for years to come, underscore that the days of the boss hounding people for their TPS reports may be over – or at least changing. In other words, the leaders of legal departments need to start thinking about how they (or their successors) will lead and manage the department five to ten years from now, and how the company will respond and manage (through policies and work environment) to a new way of working and managing. This year is a great time to start getting educated on what’s coming.
10. Value. Finally, I suspect that 2021 will be another year where in-house lawyers struggle with the question of “how do I show the value of the legal department?” This should be the year to put in place the processes and systems needed to answer this question. This includes a mix of metrics and “perception,” as trying to solve a qualitative problem with a solely quantitative approach is a mistake. Here is your high-level three-part plan for 2021:
- Always be marketing. Since value is largely subjective, a top priority becomes marketing the legal department to the business, i.e., a long-term effort to build your brand. Focus on soft skills and a service-first/get things done attitude. Learn the business and bring that knowledge to the table when solving legal problems. Most of all, be practical!
- Tell them. If you wait on the business to spontaneously recognize the value generated by the legal department, you may be waiting awhile. Sometimes you just have to tell them what value the team is delivering. Focus on regular updates and on one-off announcements when big things happen. And never let a crisis go to waste. Run to the fire – a sure way to demonstrate value.
- Measure It. Numbers do have a role in showing value because the language of business is numbers. Smart in-house lawyers speak it fluently. If you can show value with numbers (and graphs/charts), you are ahead of the curve with the business. Focus on useful KPIs, benchmarking, and internal client satisfaction (measured through surveys) as sure-fire ways to develop metrics that show value.