BUSINESSES HAVE BEEN “swimming in a sea of law” as they navigate increased regulation,
varying international legal regimes, assorted lawsuits and the impact of stiffer legal penalties for infractions. 1 As a result, senior executives have increasingly recognized that legal capabilities are
crucial for ongoing corporate success, and they understand the importance of working with legal
counsel. Indeed, one study found that 43% of U.S. companies had lawyer-directors in 2009, a notable increase from 24% in 2000.2 Other research has found that corporations generate tangible
returns, such as higher stock market valuations, when they employ attorneys who serve as board
members and when top corporate officers have legal knowledge. 3
Paradoxically, the processes through which corporate legal departments provide competitive
advantage remain poorly understood. The prevailing wisdom recognizes the need to incorporate
legal considerations into top-level business decision making, but all too often executives still view
the law as a constraint on managerial decisions, primarily perceiving it as an issue of cost and compliance. 4 This limited perspective of the law, however, does not explain how some leading
companies have managed to deploy their legal departments to shape the legal environment in
THE LEADING
QUESTION
How can
companies
use the law to
gain strategic
advantages?
FINDINGS
Companies can
adopt one of
five types of
legal strategies:
avoidance,
compliance,
prevention,
value or
transformation.
The right strategy
for a company will
depend on factors
such as its business
model, managers’
attitudes toward the
law and the legal
department’s ability
to collaborate with
managers.
Finding the Right
Corporate Legal Strategy
Some companies move beyond viewing the law just in terms
of compliance — and instead use their legal environment to
secure a competitive advantage.
BY ROBERT C. BIRD AND DAVID OROZCO
L AW
The Walt Disney
Company has successfully deployed
sophisticated legal
strategies to capture
profits from its intellectual property.