Corporate Social Responsibility: Going Beyond Compliance

Attendees of the Canadian Lawyer InHouse/Association of Corporate Counsel roundtable, composed of a carefully crafted guest list with assistance from both the ACC and Richard Stock of Catalyst Consulting, reported that their corporations are going beyond compliance when it comes to CSR and the environment.

Participants in this year’s roundtable discussion — moderated by former InHouse editor Kirsten McMahon — included: Brian Armstrong, executive vice president and general counsel, Bruce Power; Terry Badour, executive vice president, law and administration, Fairmont Raffles Hotels International; Anna Kinastowski, city solicitor, City of Toronto; Fred Krebs, president, the Association of Corporate Counsel; and Todd Melendy, vice president, assistant general counsel and chief compliance officer, Celestica Inc.

The corporate counsel roundtable topics ranged from external legal fees, pro bono work, alternative billing arrangements, what corporate counsel are looking for in a law firm, and the difficulty in keeping on top of both legal and industry development. The discussion was engaging and interesting. A more in-depth version of the roundtable report is available at www.canadianlawyermag.com/inhouse. 

On Corporate Social Responsibility

InHouse: What does CSR mean to you and your company?

Armstrong: It is a term that has, I think, come into usage relatively recently. There used to be a term that was more commonly used, and it was called corporate citizenship. I think it is all about the same kind of thing.

I think “corporate social responsibility” can be defined as an organization that recognizes its obligations to society, in the broadest sense, and seeks not only to serve its shareholders but recognizes the legitimate interests of all of its stakeholders, its employees, its suppliers, its customers, and the environment.

Badour: Well, from our perspective, it is very much the same. We focus and we define it by our relationship to communities, which is similar to the concept of stakeholders.

We are in the hospitality business, so we are looking to the local communities where we might have a hotel operation or deals with perhaps a stakeholder in respect of the business itself, which could be a particular supplier. It could be our colleagues. But it is in that relationship.

Kinastowski: Well, I think for the City of Toronto, striving to be a leader in environmental initiatives, it is a bit of a different perspective because, as the government, we are looking not only internally at our own processes and our own buildings and our own various policies, but they will have an impact on all citizens of the city.

It is not profits, it is not shareholders — it is the public at large. And how do you best set up policies that lead to certain actions that will be of benefit for the long term?

Melendy: At Celestica, we see it as a commitment to not just comply with the law but to go beyond that in the areas of environment-employee relations; and to make sure that people are treated with dignity and respect, and the environment is treated with the same dignity and respect; to advance causes that, typically, corporations weren’t or didn’t feel the need to be involved with.

But it is certainly becoming not just an obligation but also an expectation from our customers and our suppliers that we are going to act in a manner that is socially responsible for a corporation.

Krebs: One of the things that our research has shown is there are multiple definitions, and, to a certain degree, they are somewhat fuzzy at times.

And, indeed, I think it is an evolving definition, as we see, but I think a critical component is that it is voluntary. It is a voluntary activity of the organization to go beyond what is legally required, and I think that is a very important component.

Armstrong: It is interesting because I agree that it is a notion that is voluntary at the present moment, but there seems to be a bit of a trend towards determining how one measures compliance. . . with corporations, corporate social responsibility, obligations.

And there is an evolving trend, I think, towards the establishment of some sorts of standards, internationally, in this area, which is interesting. So, while it is voluntary now, it may be like one of those things that, over time, becomes something that a corporation feels obligated to do, if it is not otherwise motivated to do it.

Badour: It is not so voluntary in the U.K., for instance, with the corporation of financial institutions, where they have an obligation to be putting a certain part of their profits back in, and their real obligation to be disclosing the kind of community activities that they have.

It seems to me, you read their annual reports and see the kind of corporate and social responsibility, disclosure, that they do. It is remarkable. And the reason it is so remarkable is that I think they are regulated to do so.

Armstrong: There are many companies that publish reports on their corporate social responsibility performance during the course of a year, and we have begun to do that ourselves. It covers everything from nuclear and industrial safety to sponsorship.

Badour: It is good for business. And, particularly, I would say, in the last few years that our employees are very keen on seeing what kind of community activity . . . we have done.

And our Green Partnership Program is something that really strikes a chord, and it helps in the recruitment of talented colleagues that we bring into the company every year. 

InHouse: I would like to discuss the role of the legal department in these initiatives. Does anybody here have a high involvement?

Kinastowski: I guess, from my perspective, so much of our work is dealing with various sorts of corporate social responsibility, be it from green initiatives to climate change initiatives to even homelessness.

We have that role, as well, to ensure that our staff comply with provincial regulations in terms of, for example, the water standards, which are so important to everybody. But from our perspective, as the city wants to take on new initiatives and bring in new regulations, we are a key member of every corporate team.

Every initiative that comes forward from the city has a lawyer that is involved somewhere, somehow, providing advice, ensuring that it is set up in such a way that it is defendable legally, that it works, strategic help, as well as the legal help.

Melendy: We have a corporate social responsibility committee, of which several members are from the legal department, and then we have various members from all areas of the company, like our supply chain group, our operations group, our customer facing group. We get together on a monthly basis and discuss various initiatives within the area of corporate social responsibility and how it impacts the company.

Armstrong: I think, in Bruce Power, it is fair to say that it is really our executive team that manages and monitors our corporate social responsibility program. We have a number of management committees on which the law division is represented.

I am a member of our executive team, but I am also a member of our internal code of conduct committee, which provides oversight in terms of the administration and management of our code of conduct program. I am also a member of our corporate sponsorship committee that determines how we respond to sponsorship requests from our local communities.

But, virtually, every part of our organization is involved in one way or another with addressing corporate social responsibility obligations.

InHouse: In the past, corporate counsel often played that supporting role and were sometimes seen as the roadblock. Do you see that role changing, where you are making more strategic decisions?

Melendy: Well, certainly in the area of corporate social responsibility — because it is not a legal requirement in many cases — you are going beyond the legal standards. I think a strategic direction is very important.

In Celestica’s case, because the legal department has taken an active role in the area of corporate social responsibility, we are being looked to for strategic advice in this area, especially when you are going beyond a legal standard. So, we can advise, “OK, legally we have to get to point A,” but, when you want to go beyond point A, we are very much looked towards to provide guidance and direction in that area.

Krebs: Let’s say that you have made a strategic decision that you, amongst your suppliers, that you want them to have high standards in their labour relations, and you don’t want them using child labour, or you don’t want them paying below-market wages, or whatever.

If you are going to do anything more than simply say, “That is a good thing,” and it is more than just an aspirational statement, the law department has to be involved. And the law department would play a critical role because it would be in the context of your supply agreements, your purchase agreements, and the language of your leases, or whatever it is to force it down or to move it into the supply chain.

And so, that is a factor where, conceivably, the law department may or may not have been involved in the strategic setting of that goal, but they are going to be a critical component in the achievement of that particular goal.

Armstrong: In our case, for example, we have a very large site. We have a lot of contractors who come onto our site to do work for us in one area or another. We insist that every contractor who brings people onto our site abides by the Bruce Power values, in terms of the work that they perform. And that is written into our contractual language.

Melendy: I think law departments, too, are in a unique position where they are one of the few departments within a company that touch every area of the company. They are aware of the environmental issues, the supplier issues, the customer issues, the real estate issues, HR issues.

When you are trying to roll out something like corporate social responsibility, which touches all areas of the company, I think the law department is in a really unique position to know what is going on and how it may impact all the various other stakeholders within the company. So, I think it gives us a very unique position.

InHouse: OK, so you all seem to agree when Brian [Armstrong] had mentioned that in-house counsel are under enormous pressure.  So, what are some of the biggest challenges you face?

Badour: The biggest challenge we have is time management and reach. Since our operation has gone global in a very short period of time, it is just developing the types of resources and facilities we need to provide the legal services to our particular business, as it is now expanded around the world.

So, it is keeping up with growth and trying to manage that. I think one of the reasons we have a hard time with pro bono work is really the fact that in-house departments are stretched, and it is not like with external counsel, where law firms can expand and contract more easily than we can. We have a tough time.

And it is clear, certainly in our company, and I bet it is true for everybody, that we are just so stretched these days because of, not just the nature of the economy, it is just that business is getting ahead of us, and we play a lot of catch-up.

Armstrong: I agree with that, Terry. I was going to say my greatest challenge is just dealing with the volume of work. Our pattern over the last four or five years is we have been insourcing more and more, dealing with more and more high-level strategic issues on behalf of the company, and every day, every week, is an exercise in triage. And it is quite unlike what I was accustomed to in private practice, but it is interesting and it is challenging.

But, at the same time, it is difficult. Our law division is not planning on expanding over the next number of years. We are all under, I am sure, pressure in terms of holding head count down and holding costs down. So, it is an interesting and challenging and, albeit, difficult task.

Melendy: I would echo Terry’s comments. I mean, for a company of our size, our department is extremely lean. And trying to keep on top of legislative requirements and legal developments in 15 different countries with 40,000 employees, it is a challenge in and of itself.

And we are living in the BlackBerry age, where everyone just expects answers and to be able to get you instantly. So, it is a real challenge to  stay on top of these demands and to be available all the time and to be able to provide an answer almost instantaneously.

Kinastowski: I would echo that, as well. And I think, with the government, our salaries probably are somewhat lower than in other sectors. So, I think people come into the government with an expectation that they will be working fewer hours, and they are quite shocked to find out that the challenges are very great.

We live in a fish bowl, with the press monitoring every single move and second-guessing every decision, and we are working absolutely the same, if not greater, hours, with fewer resources, with fewer secretaries, fewer researchers, fewer everything, and they have to do it themselves.

Krebs: Again, it is the amount of information, the communication age that you mentioned, the amount of information that comes across, and just sorting through that things are changing. It is the pace of change that is happening, and then keeping up with everything and those challenges with, in most instances, static resources or only slightly growing resources in order to try to keep up.

And so, that fear of “What am I missing?” because of just the sheer volume of material that comes across my desk. That is a challenge.

InHouse: I would just like to know a bit about your relationship with your external law firms — what are you looking for from them, and are they providing it?

Armstrong: Well, we deal principally with one large external legal service provider. And what I need from them is full service. I need depth and bench strength, and I need national and international reach. We do deal with some smaller boutique firms for highly specialized work. Our labour work is with a labour boutique firm, and I don’t need the same kinds of things from them.

But, you know, one of the differences that you appreciate when you cross the line from a firm to an in-house practice is that, from the in-house perspective, the quality of the work that you expect to receive from a major national firm is taken for granted. It is not a differentiator.

When you are practising in a firm, you often have the impression that the harder you work on a file, the higher quality work you produce, the happier your client will be, and the client really doesn’t care if you return that phone call by the end of the day, or if you return that BlackBerry message by the end of the day. It is not true. The quality of work is taken for granted, and what you really need is service. You need a firm that is prepared to turn themselves inside out for you when you really need it.

Melendy: Yes. I mean,  obviously you want the usual suspects: quality of service, quick response times, bench strength. I think what is more important to me is that the law firm is almost like an extension of our legal department, and that there is a true partnership.

So, I want them to give me practical advice, not just a strict legal answer. I want them to know my organization and understand the constraints that I am under and the issues that I am facing, and act as my partner and not just a service provider.

Krebs: I would note the quality is the price of entry. I mean, that is a given. But, in a broader context, what we have heard and frequently seen is there is a level of, at times, dissatisfaction with what has been provided by the external firms. And sometimes the level of dissatisfaction results from  a service aspect.

The quality is good, but they are not getting it in the right way. Sometimes it is a quality factor, but most frequently it is a cost factor, it is a value factor. And one of the most common complaints that we hear is that the firms don’t, or seem to be [unable to], understand the value that the particular project, the particular file, whatever it happens to be, and what that is worth to the company, as opposed to what the firm wishes to charge for.

Armstrong: I have believed for a long time — I believed it when I was in private practice, and I believe it today from the perspective that I now occupy — that the large-firm business model, large-firm North American business model, is broken, and the profession needs to do something about it. I don’t believe that docketed time is a measure of anything, and certainly not a measure of value delivered.

Krebs: The billable hour may be appropriate in some circumstances, but what we have also seen, though, is it is a safe way to pay. And so, unfortunately, many in-house counsel are quite comfortable with it, and they don’t necessarily want to go to other ways, because it has become a safe, conservative way to address things. But the billable hour [creates] perverse incentives.

However, it is not necessarily bad. I have had counsel say to me that they are more than willing to pay $1,000 an hour for something that is worth $1,000 an hour. But it is when you have associates or you have others that are spending hundreds of hours on something when maybe you should have had the $1,000 [per] hour partner, and have him spend 10 hours and give you the answer that you need, as opposed to four associates spending maybe 30, 40 hours at a lower rate, but ultimately a much higher bill.

Armstrong: And that is exactly my point. And the environment that it creates for junior level associates . . . the environment that this business model creates for junior level associates in large firms is horrendous, absolutely horrendous.

Melendy: I think the problem is that it is not indicative of the value that you receive. And when you try to implement other mechanisms or billing arrangements, there is always this fear that you are not going to get the quality of service that you expect because the firm is not getting compensated for their time. And so, therefore, they are not going to put as much time in.

Kinastowski: Yes, it is very difficult, and it is very difficult in areas where there is transparency required. And how do you justify the rates in a public forum? It is very difficult. What we have done, and it has nothing to do with rates, but when we were starting to develop our in-house expertise in IT contracts, we actually had clauses put into the retainers that they would mentor the junior lawyers to provide the training to them, so that we could develop the expertise in house.

Melendy: There are times when I have received a bill for legal services that is just exorbitant for what I actually received. I will go back to the firm, and I will just say, “No, this is unacceptable.”  And if they don’t slash the bill, they know they won’t get any more work.

It is easier to do with smaller firms, where you give them discrete pieces of business, but where you have a larger firm with a very entrenched relationship and a lot of history, it is harder to break away. You are almost a captive client.

Armstrong: Well, as general counsel, we can play, I think, a somewhat significant role in this process, by insisting on a new way of doing business and supporting those kinds of efforts.

InHouse: Absolutely. And I think that is a good note to end it on.

Krebs: The last word — and a powerful one.

A complete transcript of the corporate counsel roundtable can be found at www.canadianlawyermag.com/inhouse