Friday, August 21, 2009

FTI Consulting / Corporate Board Member Survey Highlights Concern Over Pending Regulatory Wave

The ninth annual legal study by Corporate Board Member and FTI Consulting (NYSE: FCN) has revealed deep-seeded concern among General Counsel over the pending wave of tough new regulatory measures that are expected to emerge in response to the recession and financial crisis.

In this year's report, 76% of general counsel said they do not favor a more robust regulatory regime and 65% do not believe increased regulation will prevent further economic deterioration, suggesting a deep skepticism about recent regulatory overtures from the government. However, despite their concerns, the General Counsel surveyed are also pragmatic with 86% claiming to have taken steps to prepare for a stricter legal and regulatory environment.

In recent months regulators have vetted proposals impacting everything from shareholder proxies to executive compensation to audit control in an attempt to deter future meltdowns and promote ethical corporate stewardship. These proposals have elicited great debate, as legislators, shareholders and corporate directors now try to determine which actions will promote positive, long-term economic stability.

"General counsel are gearing up for a tighter regulatory environment despite real skepticism as to whether some proposed new regulations are appropriate," said Neal Hochberg, Senior Managing Director and Leader of FTI's Forensic and Litigation Consulting segment. "In many companies, GCs are the de-facto Chief Risk Officers and their overwhelming concern about regulatory proposals is telling. In practical terms however, GCs still have a job to do despite their concerns, and are now looking for options to help manage a burgeoning work load."

While GCs question the need for stricter business regulation, about half (52%) of the survey respondents believe Congress should investigate where the responsibility lies for the current financial crisis. Similarly, 51% of corporate directors agree that an investigation by Congress is warranted.

Not surprisingly, regulatory compliance ranked highest among a list of issues general counsel say will add the most workload to their department over the next 12 months, with 65% saying they need to spend more time on compliance this year compared to last year, more than double the response two years ago.

Moreover, the management of outside legal fees rated as general counsel's top concern in 2009. "Even before the current recession began, and certainly before the low point of the recession this past autumn and winter, legal costs have been a central issue for GCs and directors," said FTI's Hochberg. "Given the current environment, the pressure on outside counsel and advisors to reduce fees has not abated and will not ease in the near future." On a positive note, despite the emphasis on economies and streamlining legal costs this year, most general counsel (83%) say they had not felt pressure to cut their department's compliance and ethics training budget in 2009.

Additional highlights

The following are additional highlights from the Corporate Board Member/FTI Consulting 2009 Legal Study:

  • Executive compensation -- Both directors and general counsel have a heightened awareness of executive compensation issues this year. Among 18 legal issues in the survey, executive compensation topped the list of directors' concerns in 2009, eclipsing M&A for the first time in four years. What's more, 41% of directors said they will likely use outside counsel to assist with executive compensation this year, an astounding increase compared to the 1% who responded similarly in the 2007 Corporate Board Member/FTI study. More than half (54%) of general counsel say they will spend more time on executive compensation this year compared to last year.
  • E-discovery -- Electronic discovery now requires all companies to develop means for handling requests for legal holds and develop massive document retention systems. This area continues to rate high on the list of concerns for general counsel, second only to managing outside legal fees.
  • Labor/employment -- With unemployment levels reaching 9.7% at midyear 2009, the topic of labor and employment garnered the most-frequent response (79%) from general counsel as an issue on which they would anticipate turning to outside counsel for assistance.
  • Setting the Tone for Ethics -- Fully 76% believe the general counsel shares equally in the responsibility for setting the ethical tone at the top; 14% think they play the primary role; and 10% believe the CEO and board plays the primary role while the general counsel plays only a minor, supporting role.
  • Foreign Corrupt Practices Act -- In a world in which new companies are expanding globally each day, the intricacies of the FCPA presents complex compliance responsibilities. While 67% of general counsel say their company is subject to compliance under the FCPA, fully 64% of those say there is room for improvement in their FCPA training and compliance programs.

For additional findings or to download a pdf version of the complete report on the Corporate Board Member/FTI Consulting 2009 Legal Study, please visit or

About the Study

During January 2008, 3,000 directors and 2,279 general counsel of publicly traded companies received the legal issues research study via mail. An additional 1,129 directors of publicly traded companies received the survey via email. Overall, there was an 8.3% response rate to this study with 534 total responses. Of the 2,279 general counsel receiving the survey, 240 were returned for a 10.5% response rate within the general counsel sample. Of the 4129 directors receiving the study, 294 responded for a 7.1% response rate within the director sample.

About FTI Consulting

FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,300 employees located in most major business centers in the world, we work closely with clients every day to anticipate, illuminate, and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, strategic communications and restructuring. More information can be found at

About Corporate Board Member

Corporate Board Member is the leading information resource for senior officers and directors of publicly traded corporations, large private companies, and Global 1000 firms. The quarterly publication provides readers with decision-making tools to deal with the corporate governance challenges confronting their boards. Corporate Board Member further extends its governance leadership through an online resource center, conferences, roundtables, and timely research. The magazine maintains the most comprehensive, up-to-date database of directors and officers serving on boards of publicly traded companies listed with NYSE Euronext, NYSE Alternext U.S., and The NASDAQ OMX Group Inc stock exchanges.

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