Legal, Risk, Compliance & Government Affairs
emerging markets, legal talent, China
The need to find firm footing in China’s legal landscape is all the more urgent because China is rebounding from the recession faster than other countries, and global companies certainly want to be a part of it.
While the recession has highlighted the need for global companies to seek growth in emerging markets, the rejection by Chinese regulators of Coca-Cola’s bid to buy Chinese juice-maker Huiyuan reminds us how tricky that can be. It’s not only the markets that are emerging but also the legal and regulatory landscape that companies must deal with.
As the trends in the hiring of regional chief legal and compliance officers by global companies confirm, these markets differ, sometimes sharply.
In China, for example, global companies formerly filled the role with expats. No longer. Today, they are looking for Chinese nationals who might be able to better penetrate the country’s often opaque world of regulation.
When China joined the World Trade Organization in 2001 it promised to allow a freer flow of capital, but the record has been spotty at best. And the Coke rejection was based on a new Chinese anti-monopoly law that has caused concern among made global companies. The foreign business community was “bewildered,” says the Wall Street Journal’s “Heard on the Street” column, because they saw Coke as “playing all the right cards.”
The need to find firm footing in China’s legal landscape is all the more urgent because China is rebounding from the recession faster than other countries, and global companies certainly want to be a part of it. (China is Coke’s fourth largest market by volume.)
The good news is that although the talent pool of Chinese nationals who attended top law schools in the U.S., Europe, or China remains small, it is developing. We are increasingly seeing some top-notch homegrown lawyers, with good quanxi – the personal networks of influence and relationships that are central to Chinese society.
In Central and Eastern Europe the legal needs of global companies differ from country to country, depending on the maturity of their legal systems and markets.
In countries with more mature systems – Poland, Hungary, the Czech Republic – regional CEOs and country presidents want the same thing in a chief legal officer that CEOs want in North America and Western Europe: a genuine business partner.
In addition, they need legal officers who can participate in the ongoing internationalization of local legal codes that has resulted from expanded EU membership and freer trade. In Poland, for example, a new generation of lawyers arose after 1989 in the wake of new laws and international agreements regarding intellectual property.
Nevertheless, the talent pool for senior in-house legal talent remains small even in mature systems. Law firms offer higher compensation and most of the people that have lately emerged from their countries’ outstanding law schools and work inside corporations are still at the junior level.
In Eastern European countries with less mature systems – Ukraine, Russia, Romania, and others – the talent challenges are even greater. In those regions, chief legal officers come primarily from abroad [mostly Western Europeans and North Americans] and must contend with considerable language barriers.
As in the mature systems of Central Europe, global companies operating in Mexico and the more developed economies in South America want legal officers who can act as business partners to the chief executive. That means understanding markets and customers and finding creative ways to meet business needs as well as regulations, rather than simply saying no.
The size of the talent pool in the region often depends on the willingness of companies to look beyond their industries. Almost always fully bilingual nationals, the most desirable candidates have international experience, exposure to other cultures, and strong negotiating and lobbying skills. For many global companies in the region, legal experience in M&A is often a must.
Companies that have depended heavily on outside counsel are also looking for in-house legal officers who can manage such resources wisely and reduce their costs.
Reporting structures suggest that views of the role of chief compliance officers and General Counsels vary from company to company. In Mexico, for example, we’ve found that in about 70% of companies the chief compliance officer, who is sometimes not a lawyer, reports directly to the CEO. About 30% report to the General Counsel. Meanwhile, 80% of GCs report to the CEO, while the other 20% report to the CFO.
Throughout all of these emerging markets – China, Central and Eastern Europe, and Latin America – there is no universal trend. Each region presents issues as unique as the region itself, and a global company needs to understand the issues in all regions.