AnQrganizationrSLegaiFunction
A legal department’s task is to support a business in reaching its objectives, by maximizing the legal upside of an organization’s activities and minimizing the legal downside, or: “optimizing the organization’s legal function”.
An organization’s legal function involves all legal aspects, connected to all its activities and is performed by many organizational constituents. Ultimately, general management will be responsible for managing the legal function, but a legal department obviously plays an essential role, together with a compliance department and possibly a department for contract management or corporate social responsibility. From here on, we will refer to all departments that have specialized legal expertise as the (extended) legal department.Some of the most important aspects of the legal function are:
10.1 Contracts
As a rule, every large organization juggles a dazzling amount of contracts, and their variety and the number of employees involved in negotiating and executing those contracts are equally dazzling. Sales, procurement, human resources and research and development and all other business units and departments will all have their own contracting needs. Contracts are the strings in the complex legal web of employees, suppliers, contractors, consultants, temporary workers, service providers, outsourcers, brokers, intermediaries and agents of which modern organizations are made. Hence, controlling the life cycles of all contracts in an organization is extremely complex and will involve many different processes. The responsibility for contract-related processes will always be distributed across several departments, requiring effective coordination between the legal department, contract management and other departments involved. A reactive legal department may feel responsible only for the legal quality of a contract on which it has been asked to advise.
As contracts are one of the primary sources of both legal risk and legal opportunity, a proactive legal department should play an active and initiating role in continuously improving the organizations contracting and contract management processes.10.2 Compliance
As mentioned above, the amount of legislation and regulation that an organization has to comply with depends on its size, legal structure and the nature of an organization's activities. Generally, most large organizations experience the amount of regulation with which they have to comply as ever increasing. Non-compliance with legal norms accounts for some of the largest corporate scandals in recent years, with the Volkswagen emissions scandal as the most recent addition to this long list. It is therefore not surprising that legal professionals consider legislative and regulatory issues one of the most concerning factors. Again, responsibility for this part of the legal function will be distributed across several departments. Both operations, compliance and legal play vital roles. As with contracts and contract management, compliance demands a lot of organizational discipline and has complex managerial aspects. Compliance is, of course, not limited to external legal norms. Internal rules and corporate social responsibility policies that an organization strives to uphold are equally important.
10.3 ProtectingAssets
The law provides various instruments that an organization can deploy to protect its assets. Choosing a specific organizational legal structure may transfer risk and protect the parent organization from the possible losses and liability of a subsidiary. Another example is the protection of an organization's ideas and inventions through the use of intellectual property rights.
10.4 Preventing Liability
The legal function also encompasses the general prevention of liability for possible torts by the organization. Torts may vary from inadvertently violating a competitor's intellectual property rights or causing environmental pollution to not
responding adequately to a claim by an employee that has been sexually harassed by a manager.
As Bagley and Savage12 advise, an organization’s management should implement an ongoing educational program and monitoring aimed at reducing the risks of tort liability. The contents of such program should depend on the organization’s specific activities and the possible risks that these activities present. A legal department should play a proactive and advisory role with regard to such programs.10.5 Promoting Organizational Integrity
Last but not least, promoting organizational integrity is an important aspect of the legal function. It may be unwise or unethical to pursue certain initiatives, even if not prohibited by clear rules. All departments should continuously strive to act in an ethical manner, but the connection between law, legal norms and ethics clearly shows that a legal department has a special task in ensuring that the organization maintains ethical standards.
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