Dive Brief:
- Chief legal officers are planning to increase their outside counsel spend this year in a major departure from previous years, when their goal was to bring more work in-house as an efficiency measure, a survey by the Association of Corporate Counsel shows.
- Almost 45% of CLOs say they’re increasing their outside counsel spend, a 17-percentage-point jump from the previous year.
- One reason for the shift: CLOs are facing more — and more complex — litigation and investigations, both internal and external. “More complexity results in higher costs,” ACC says in the survey report.
Dive Insight:
For several years, CLOs have been trying to execute C-suite mandates to cut costs by reducing their biggest budget exposure — outside counsel spend. In ACC’s survey last year, almost two-thirds of CLOs said they’re having their in-house staff do more legal work themselves.
But that strategy is under pressure as CLOs wrestle with insufficient staff to take on more legal work. “Being understaffed is the biggest barrier legal departments face,” says the report, which ACC releases annually.
To address that challenge, half of CLOs in large companies, and about a third in smaller companies, say they’re increasing their lawyer hires. ACC considers companies with annual revenue of $1 billion or more a large company.
Whether the work is done in-house or by outside counsel, the increased legal demand is coming at CLOs from multiple directions.
Almost a quarter of CLOs say their company was subject to an investigation last year, mainly from a regulator that oversees their industry. But other types of investigations, like those looking at employment and labor law violations, were an issue, too. Those made up about a quarter of the investigations. For larger companies, antitrust and AI-related investigations were a big part of the CLO’s focus.
Litigation is another driver of the increased legal load, with more than 40% of CLOs reporting an uptick in the number of lawsuits they face and almost 40% saying those lawsuits are increasingly complex.
Meanwhile, internal investigations are on the rise, too. Almost 45% say they’re facing more of those.
On the plus side, in part thanks to technology investments they’ve made, more than 90% of CLOs say their company is better prepared to catch and respond to data-related risks, with a third saying they’ve made significant improvement.
“This increased preparedness can be attributed to a heightened awareness of data-related risks and proactive measures [they’ve] taken,” the report says, “These measures include implementing technology solutions (52%), developing comprehensive data management strategies (41%) and hiring dedicated data privacy or compliance officers (17%).”
The report also looks at organizational issues. The findings show CLOs are increasingly overseeing more than just the legal function — they’re often overseeing legal-adjacent functions like compliance, privacy and ethics, and they're more likely to report directly to the CEO than before, with more than 80% of CLOs in the United States having that direct-report relationship. That number has been steadily increasing over the years.
CLOs’ … responsibilities beyond legal roles are growing,” says Veta Richardson, ACCs president and CEO. “They are assuming greater leadership across organizations.”
In another finding, CLOs want the lawyers on their in-house team to become more acquainted with business issues so they’ll evaluate problems from more than a legal standpoint. Almost 60% say business knowledge is a top skill for their team members to develop.
“CLOs [are prioritizing] business acumen in their legal teams,” the report says. They also want their team members to get more comfortable with technology.
