Five Differentiators of High Growth Technology General Counsels

Since January 2021, almost 20% of the Fortune 500 has undergone a change in their General Counsel. In this article, we look at the hiring trends in the General Counsel position, with a special focus on high growth technology companies.

Perhaps the most prominent trend in General Counsel recruiting is the focus on improving diversity at the executive leadership level. Boards and investors are placing increased pressure on CEOs to diversify their leadership teams. Our research on GCs at Fortune 500 companies shows that this cohort has become increasingly diverse, and organizations are using every GC succession as an opportunity to search for a broader slate of legal talent to meaningfully diversify their leadership teams. The competition to recruit proven diverse talent is fierce. Since January 2020, 43 companies have a newly appointed ethnically diverse GC – significantly higher than past years.

Technology company General Counsels are poised for significant turnover over the next few years. 54% of GCs at Fortune 500 technology companies have been in their roles for five years or more, making them prime succession candidates. Additionally, technology companies are coming under increased government and regulatory scrutiny, highlighting the need for seasoned leaders and new skills in the top legal job to guide them through this difficult period.

Technology companies entering a new phase of growth are coming under increasing investor and government scrutiny and are focused on building diverse teams. They will need to carefully prepare for hiring their next GC. To better understand what makes such GCs unique, RRA analyzed the profiles of 52 GCs at high growth technology companies, compared them to GCs of Fortune 500 companies, and combined this with our market insights. We hope these findings will help boards, CEOs, PE investors, CHROs and GCs find and develop their next GC.

1. The value of prior General Counsel experience is at an all-time high

46% of high growth technology GCs have been in a GC or CLO role prior to taking their current roles, versus only 35% of Fortune 500 GCs, indicating a strong preference for seasoned legal executives in technology.

^{Source: RRA analysis of GCs of prominent high growth technology companies (N=52); RRA analysis of Fortune 500 GCs (N=480)}

We uncovered two reasons for this:

High growth technology GCs are battle-tested. In the current business environment, GCs need to bring not only their legal and governance expertise to the table, but also a strong commercial mindset and the gravitas to act as advisors to the CEO, executive leadership team and board. Furthermore, with the technology industry under increased congressional scrutiny, the value of a seasoned legal advisor may be at an all-time high. Experienced GCs with a track record of success in the role have often guided their prior companies through regulatory challenges that allow them to remain confident and calm under pressure, to manage the board, and to communicate and interact with regulators with more ease, thereby giving CEOs confidence in selecting them.

High growth technology companies have market winds at their backs: High growth technology companies also have benefitted from strong stock performance, allowing them to have their pick of experienced  leaders via differentiated and competitive equity compensation. From January 2016 to January 2022, the Nasdaq 100 Technology Sector index was up almost 500%, though it has since fallen 30%. Beyond enabling the tech industry to have its pick of talent, this market performance has had several areas of impact. Firstly, tenured GCs have done well financially, hastening their potential retirement. Secondly, the market has pushed compensation levels up significantly. Finally, wealth creation expectations have been set high for future technology sector GC hires.   

2. Internal General Counsel succession is far from a given, especially in high growth technology companies

56% of high growth technology GCs are external hires, versus 49% of Fortune 500 GCs, suggesting the need for better succession planning in the GC role, especially in tech.

^{Source: RRA analysis of GCs of prominent high growth technology companies (N=52); RRA analysis of Fortune 500 GCs (N=480)}

Companies that scale quickly and want to become known as best-in-class employers will need to become more intentional about succession planning or risk losing their ability to motivate and retain their current teams. Existing leaders who feel like they do not have a path in the organization are more likely to be open to external opportunities. In growth periods, loss of seasoned leaders in the organization is especially painful.

At the same time, there are several advantages to hiring GCs from outside the organization. Outsiders can be selected to bring the necessary expertise to organizations undergoing transformation, which many high growth companies are experiencing. For instance, a $1B company looking to grow 10x in size may want to hire someone who knows what a $10B company looks like in terms of structure, business model and governance. A company that – through its growth – has landed on regulators’ radar may need a GC who has previously guided a company through a major investigation.

GCs, CHROs, CEOs and boards should take a thoughtful approach to GC succession by starting the process early and giving high potential internal candidates rotations that include public company governance experience, exposure to leadership and the board, and commercial experience in key parts of the business, along with significant people leadership opportunities.

3. Companies value a General Counsel with sector knowledge, but are willing to trade this off for government experience or to access larger pools of qualified diverse talent

52% of externally appointed high growth technology GCs are from the same sector, vs. 44% of Fortune 500 GCs, indicating a slight preference for prior experience in the high growth technology sector.

As noted earlier, given the need for experienced leaders, many companies are looking externally for their next GC. In addition to prior GC experience, technology companies have placed a premium on technology sector experience, given the significantly different business dynamics, fast pace, and evolving regulatory frameworks they face.

In some cases, companies have been willing to overlook sector experience to bring in government experience, as the technology sector continues to become more scrutinized and regulated. In our analysis, 37% of high growth technology GCs had prior government experience, versus only 21% of Fortune 500 GCs. Examples include PayPal, whose GC has prior experience at the US Department of Treasury, and Meta, whose GC – a former Davis Polk Partner – held White House, DOJ and State Department roles.

In other cases, companies that have not had historically diverse legal functions have gone outside their industries to access diverse pools of qualified legal talent during GC successions. Examples include Intel, whose GC came from Industrial/Power Management (Eaton Corp), Qualcomm, whose GC came from Automotive (General Motors) , and Uber, whose GC joined from the Consumer sector (PepsiCo), in addition to having worked at the DOJ.

4. General Counsels at high growth technology companies switch roles faster

The tenure of high growth technology GCs is a full 14 months shorter compared to Fortune 500 GCs. Moreover, more than half of the high growth cohort we analyzed had been appointed since 2019. This higher churn among the high growth technology GCs points to the pace at which such companies have evolved, especially recently. A company that scales quickly tends to be very different four years down the road, and consequently, requires a different skillset across its C-suite.

The tenure of high growth technology GCs is 14 months shorter than Fortune 500 GCs

^{Source: RRA analysis of GCs of prominent high growth technology companies (N=52); RRA analysis of Fortune 500 GCs (N=480)}

There are several other reasons high growth companies see churn in their top legal job:

In some cases, GCs are promoted into other roles. Zoom promoted chief legal officer Aparna Bawa to Chief Operating Officer, and then appointed Jeff True to General Counsel. Airbnb also promoted its General Counsel, Belinda Johnson, to oversee business affairs and legal, and then to Chief Operating Officer. This made way for current General Counsel, Rich Baer, a seasoned GC who had previously held the role at Liberty Media, United Health and Qwest Communications.

In other cases, the sitting General Counsel may choose to retire after a successful growth run. Kathleen Phillips, who served as both GC and CFO of Zillow retired and currently serves on a number of external boards. Micron’s GC, Joel Poppen, retired and handed off the GC role to Rob Beard, who had previously served as his deputy.

Finally, General Counsels may leave one high growth technology company for another. Jim Shaughnessy, who held the GC role at Workday for eight years before handing it off to Rich Sauer, moved to DocuSign, and Tram Phi moved from DocuSign to Databricks. [For more insights on the churn of general counsels, please refer to our Annual Fortune 500 General Counsel Report 2022.]

5. High growth technology companies are making efforts to hire diverse General Counsels with some pockets of best practice

Half of the high growth technology GC cohort we analyzed are female or ethnically diverse, vs. 44% of Fortune 500 General Counsels. While both groups are roughly equally diverse, it is evident that high growth technology companies are making concerted efforts to diversify their legal leadership.

^{Source: RRA analysis of GCs of prominent high growth technology companies (N=52); RRA analysis of Fortune 500 GCs (N=480)}

_{*In 2019, Harvey Anderson ascended from Deputy GC to GC of HP. He was promoted to CLO in 2021. He announced his retirement in July 2022 and will be succeeded by former AOL/Yahoo GC Julie Jacobs.} 

Looking ahead

There are many considerations when planning for a General Counsel change. Companies seeking to diversify their leadership teams and address their unique business situations must think creatively about internal and external talent. The savviest boards, CEOs, and investors make smart trade-offs to attract and develop exceptional leaders, including looking outside their industry at candidates who may have guided a different company through a similar business situation. Additionally, companies are meeting high potential step-up candidates who may have served as the #2 at larger organizations. Finally, while not for every company, the Covid-19 pandemic has further expanded the pool of available talent, as companies that have migrated to a hybrid set-up will gain access to a huge pool of executives with prior GC experience, along with experience specific to the company situation (e.g., IPO), who are based in other locations.

While flexibility on location has its advantages, CEOs and leadership teams are far from unanimously supporting hybrid or virtual C-suite set-ups. CHROs are currently grappling with this disconnect between leaders and talent and arming themselves with the support needed to hire and onboard executives in a hybrid or remote work setting. Such hiring processes are highly dependent on a strong company culture, an effective C-suite team and a comprehensive onboarding and lift-off process for the incoming executive. (For more information on this topic, see our recent research on the effects of hybrid work on leaders, employees, and workplace culture.) Companies that manage a streamlined hiring process and engage top talent based on track record rather than location, industry, and prior experience, will position themselves for success.

Despite the challenges these considerations present, companies that holistically assess GCs against these five differentiators will be poised for success.

Authors

William McKinnon is a senior member of Russell Reynolds Associates’ Legal, Risk & Compliance Officers capability. He is based in Washington D.C.

Harsonal Sachar leads Knowledge for Russell Reynolds Associates’ Legal, Risk & Compliance Officers and Human Resources Officers capabilities. She is based in Toronto.

Data & Analytics

Kunal Khanna is part of the Data Services Team at WNS serving Russell Reynolds Associates’ Legal, Risk & Compliance Officers capability. He is based in New Delhi.