Alistair MacDonald QC is chairman of the General Bar Council of England & Wales
In one week’s time, from February 23-25, the world’s legal and business leaders will descend on London, UK, for the first ever Global Law Summit. Despite its name, the summit is less a pure legal event than an opportunity to bring the business and the legal world together. Never has there been a more relevant time for this to happen. The Summit programme reflects this need. Topics of discussion include business and human rights, activist investors, and business and the rule of law, all pointing to the growing importance of law in business. The symbiotic relationship between law and business is at the heart of the Summit and features as a unifying element throughout.
Of course, it is necessary to say how important a stable, efficient and incorruptible legal system is to the prosperity of the business and financial sectors even in normal times. However well-ordered commercial relations are, it is inevitable that disputes will arise. And this is particularly so in an increasingly complex market involving derivatives, swaps and complex, trans-national energy deals. The need for legal advice and representation spreads to all parts of the intellectual firmament. As biological and other scientific advances occur, difficult questions are raised as to the validity of patents in ways quite outside the imagination of lawyers from earlier, and even recent, generations. And so it is that high quality legal services provide the oil, which lubricates the engine of prosperity and progress.
But these are far from ordinary times. Although it feels like an age since the global financial crisis struck every part of the world, its effects are still resonating. Individuals and businesses were subjected to hefty fines in the courts and there were longer term consequences too. The de-stablising effects of the crisis caused governments around the world to review and reform the regulatory regimes affecting financial services and banking. And these consequences and the new order in this sector have been so important that there has never been a greater need for top class legal services to help steer and guide business through the shoals and currents of the twin challenges of penalties and reform. All of this points to a greater need for the world’s lawyers to come together with those in the business community in order to ensure as smooth a transition into the new world as possible. We can be sure that this synergy is not something that will be needed only for a transient period. It will be necessary to take advice on a regular basis as new areas of potential liability, for example under the Bribery Act, begin to bite on hitherto normal business practices.
The importance of human rights and due diligence in M&A and other relevant commercial transactions feature much higher on the agenda than they did before. Many companies have moved to non-financial reporting in order to show the impact of their activities on the local environment and community.
Add to the mix the growing complexity of globalisation and the same picture again emerges clearly – law has a bigger role to play in the strategies and running of the world’s banks, businesses and finance sectors.
Many of the Bar Council’s members – high-profile barristers – have transferred their skills from the courtroom to the boardroom: Mark Littman QC, Lord Alexander QC, Dan Brennan QC and Robert Webb QC, to name but four. It may be that the conditions are now right for more leading lawyers to become involved in corporate decision-making, instead of being limited to providing advice and handling disputes.
Many barristers do not practise at the Bar but go straight to the City, business or government service. The skills barristers gain from their training are eminently well suited to the boardroom, especially when avoiding risk is at the top of the agenda for many businesses.
Lawyers have a particular talent for:
- Analyzing the evidence;
- Assembling and developing arguments;
- Identifying the course of action which is best supported by the evidence;
- Influencing outcomes;
- Persuading decision-makers, and
- Acting with integrity.
Today, risk aversion is an asset rather than a burden. The identification of pitfalls by means of taking sound legal advice, well in advance of the need to take decisions and in order precisely to avoid a crisis, will become an essential element of good commercial practice. Prevention is always better than a cure and, in view of the very high stakes now being played for in the world of business, such a course of action will be highly cost-efficient.
And this migration of lawyers into the boardroom is an increasing international trend. In 2014, a study by US academics, Lawyers and Fools: Lawyer-Directors in Public Corporations, found that lawyers have become increasingly prevalent on boards in the US. Some 24 per cent of US companies had lawyer directors in 2000, by 2009 this had risen to 43%. The study also found that having lawyers at the boardroom table had a good effect on corporate performance.
Companies with lawyers on their board were found to have lower litigation risk with, for example, stock option backdating litigation 94 per cent lower at companies with legal directors.
It would be naïve of me, even as Chairman of the Bar, to say that lawyers in such roles can, in all circumstances, guarantee low risk. There are too many external factors at play. However, there is clearly a strong argument for the rule of law and its guardians, that is to say, lawyers, to be involved actively at different points in the development of a business; from strategy formation to compliance and risk management, and on to dispute resolution through mediation, arbitration and the courts.
How businesses and the economy at large navigate through the increasingly complex compliance and risk maze and ensure that the rule of law looms large in the strategic aims of any commercial entity will undoubtedly be a major theme at the Global Law Summit and in boardrooms across the world.
Battling Covid collateral damage, Renault says 2021 will be volatile
By Gilles Guillaume
PARIS (Reuters) – Renault said on Friday it is still fighting the lingering effects of the COVID-19 pandemic, including a shortage of semiconductor chips, that could make for another rough year for the French carmaker.
Renault reported an 8 billion euro ($9.7 billion) loss for 2020 which, combined with gloomy take on the market, sent its shares down more than 5% in late morning trading.
“We are in the midst of a battle to try to manage a difficult year in terms of supply chains, of components,” Chief Executive Luca de Meo told reporters. “This is all the collateral damage of the Covid pandemic… we will have a fairly volatile year.”
De Meo, who took over last July, is looking at ways to boost profitability and sales at Renault while pushing ahead with cost cuts. There were early signs of improving momentum as margins inched up in the second half of 2020.
The group gave no financial guidance for this year, although it said it might reach a target of achieving 2 billion euros in costs cuts by 2023 ahead of time, possibly by December.
Executives said they were confident the carmaker could be profitable in the second half of 2021, but that they lacked sufficient market visibility to provide a forecast.
Renault struck a cautious note, saying it was focused on its recovery but warned orders had faltered in early 2021 as pandemic restrictions continued in some countries.
The group is facing new challenges as the European Union tightens emissions regulations and after rivals PSA and Fiat Chrysler joined forces to create Stellantis, the world’s fourth-biggest automaker.
The auto industry endured a tough 2020 but a swift rebound in premium car sales in China helped companies such as Volkswagen and Daimler to weather the storm.
Auto companies globally have since been hit by a shortage of semiconductors that has forced production cuts worldwide.
“The beginning of the year has shown some signs of weakness,” De Meo told analysts, but added the chip shortage should be resolved by the second half of 2021. “We have taken the necessary measures to anticipate and overcome challenges.”
Renault estimated the chip shortage could reduce its production by about 100,000 vehicles this year.
The group was already loss-making in 2019, but took a sharp hit in 2020 during lockdowns to fight the pandemic, which also hurt its Japanese partner Nissan.
Analysts polled by Refinitiv had expected a 7.4 billion euro loss for 2020. The group posted negative free cash flow for 2020.
The 2018 arrest of Carlos Ghosn, who formerly lead the alliance between Renault and Nissan, plunged the automakers into turmoil.
In a further sign that the companies have been working to repair the alliance, De Meo told journalists that Renault and Nissan will announce new joint products together in the coming weeks or months.
Renault has begun to raise prices on some car models, and group operating profit, which was negative for 2020 as a whole, improved in the last six months of the year, reaching 866 million euros or 3.5% of revenue.
Analysts at Jefferies said the operating performance was better than expected. Sales were still falling in the second half, but less sharply.
Renault is slashing jobs and trimming its range of cars, allowing it to slice spending in areas like research and development as it focuses on redressing its finances. It is also pivoting more towards electric cars as part of its revamp.
It was already struggling more than some rivals with sliding sales before the pandemic, after years of a vast expansion drive it is now trying to rein in, focusing on profitable markets.
De Meo told journalists on Friday that the French carmaker will make three new higher-margin models at its Palencia plant in Spain, where manufacturing costs are lower, between 2022 and 2024.
($1 = 0.8269 euros)
(Reporting by Gilles Guillaume and Sarah White in Paris, Nick Carey in London; Editing by Christopher Cushing, David Evans and Jan Harvey)
UK delays review of business rates tax until autumn
LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.
Many companies are demanding reductions in their business rates to help them compete with online retailers.
“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.
Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.
($1 = 0.7152 pounds)
(Writing by William Schomberg, editing by David Milliken)
Discounter Pepco has all of Europe in its sights
By James Davey
LONDON (Reuters) – Pepco Group, which owns British discount retailer Poundland, has targeted 400 store openings across Europe in its 2020-21 financial year as it expands its PEPCO brand beyond central and eastern Europe, its boss said on Friday.
The group opened a net 327 new stores in its 2019-20 year, taking the total to 3,021 in 15 countries. The PEPCO brand entered western Europe for the first time with openings in Italy and it plans its first foray into Spain in April or May.
Chief Executive Andy Bond said its five stores in Italy have traded “super well” so far.
“That’s given us a lot of confidence that we can now start building PEPCO into western Europe and that expands our market opportunity from roughly 100 million people (in central and eastern Europe) to roughly 500 million people,” he told Reuters.
To further illustrate the brand’s potential he noted that the group has more than 1,000 PEPCO shops in Poland, which has a significantly smaller population and gross domestic product than Italy or Spain.
The company, which also owns the Dealz brand in Europe but does not trade online, has already opened more than 100 of the targeted 400 new stores this financial year.
Pepco Group is part of South African conglomerate Steinhoff, which is still battling the fallout of a 2017 accounting scandal.
Since 2019 Steinhoff and its creditors have been evaluating a range of strategic options for Pepco Group, including a potential public listing, private equity sale or trade sale.
That process was delayed by the pandemic, but Steinhoff said last month that it had resumed.
“The business will be up for sale at the right time. It’s a case of when, rather than if,” said Bond, a former boss of British supermarket chain Asda.
Pepco Group on Friday reported a 31% drop in full-year core earnings, citing temporary coronavirus-related store closures.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 229 million euros ($277 million) for the year to Sept. 30, against 331 million euros the previous year.
Sales rose 3% to 3.5 billion euros, reflecting new store openings.
($1 = 0.8279 euros)
(Reporting by James Davey; Editing by David Goodman)
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