Scotland | Winter 2016/17
The professional life of a public company general counsel in Scotland can feel isolated at times. As a member of a small club, opportunities to plug into the professional networks that their peers in the South East of England take for granted can be limited. ‘We do get a sense sometimes that we are a decreasing community!’ confesses Christopher Morgan, GC and company secretary at Glasgow-based engineering plc Weir Group. ‘Certainly the number of Scottish-based plc GCs is thin on the ground and
He is not exaggerating. There are now just three Scotland-headquartered companies on the UK’s largest listings market – The Royal Bank of Scotland (RBS), Scottish and Southern Energy (SSE) and Standard Life – and the pull of the M25 corridor has seen two of their GC roles migrate, leaving Standard Life’s Rushad Abadan as the sole FTSE 100 GC based in Scotland.
Casting the net to the FTSE 350, Abadan is joined by Peter Kennerley of Aggreko, Lisa Brown of Alliance Trust, Duncan Holland of Cairn Energy, and Morgan at Weir. Until recently there was a sixth member of the club, but with Robbie Brown’s departure from Wood Group in early 2016 the Aberdeen-based oil and gas company’s GC role moved from Scotland to Houston, Texas.
For those who remember the days when the country was home to some of the UK’s most sought after plc legal roles, it feels like a lot has changed. As Martin Cooke, GC of international spirits company The Edrington Group – one of Scotland’s largest private companies – puts it, ‘being a GC in Scotland can be quite a lonely place’.
This is only part of the story, however. In broader terms, the in-house community in Scotland has much going for it. Almost 3,000 Scottish solicitors now work in-house, just under one third of the country’s legal profession, and although public and government services roles dominate there is a diverse collection of in-house lawyers working in the commercial sector and enjoying the quality of life, rich culture and spectacular landscape of Scotland.
Scots GCs don’t operate in a bubble. You get exposed to a much wider range of backgrounds.
Martin Nolan, Payfont
The In-House Lawyer felt it was high time to give the country’s in-house lawyers the coverage they deserve.
Where have all the plcs gone?
In part, Scotland’s dwindling GC community has resulted from the decline in the number of public companies headquartered there. ‘Sadly, the number of listed companies in Scotland seems to have dropped in recent years,’ says Neil MacLennan, GC and company secretary of Edinburgh-based materials testing company Exova Group. Exova floated in 2014 with a market capitalisation of £550m. MacLennan believes this was the largest main-market flotation in Scotland since Standard Life in 2006, but there have not been many to compare it with.
‘It’s a bit of a shame that there are not many public companies in Scotland,’ adds MacLennan. ‘In the last three to four years the number of flotations has picked up throughout the UK but there have been very few in Scotland and, aside from financial services, there aren’t that many large international trading businesses here anymore.’
There have not been many flotations, but there have been a number of de-listings. In the past decade, four Scottish companies have dropped out of the FTSE 100: Scottish Power became a subsidiary of Spanish company Iberdrola in 2006; HBOS was acquired by Lloyds Banking Group in 2008; the same year Scottish & Newcastle was broken up following its acquisition by Heineken and Carlsberg; and in 2012 Cairn Energy decided to return around $3.5bn in cash to shareholders, meaning it joined Aberdeen Asset Management, Aggreko, Alliance Trust, Stagecoach Group and Weir Group in the FTSE 250.
In this same period, a number of FTSE 250 companies – including Forth Ports and Exova – slipped out of the listings, though they continue to offer substantial opportunities for career development in-house.
While Scottish SMEs are thriving, outside the main market the situation has been compounded by struggles in the oil and gas sector. Scottish-headquartered Alternative Investment Market (AIM)-listed companies in the sector fell by more than 30% in 2015.
As a result, those wishing to make the move from private practice to in-house have found the going tough in the last few years. Stephen Swan, now legal director at Edinburgh Airport, reflects on joining the Glenrothes offices of Raytheon in 2007.
‘It was a great role to land but it was a slog. There are very few suitable in-house roles up here now – even the North West and the Midlands have more opportunities than Scotland. If you decide to move in-house but want stay in Scotland it can be a hard trick to pull off.’
Lisa Brown of Alliance Trust had a similar experience. ‘I worked in London for a number of years and when I moved back I noticed that the GC community in Scotland was more or less the same. GC roles don’t come up very often and once people are in a senior position they either tend to stay put or swap roles.’
Finding a suitable role in the commercial sector is only the first challenge lawyers in Scotland face. A related difficulty is the lack of opportunities to network with peers. Even a FTSE 100 GC like Abadan has found it hard to meet relevant contacts. ‘I would like to do a bit more networking,’ says Abadan, ‘but it can be difficult to find appropriate forums in Scotland. That naturally means you’ve got a diminishing pool of senior people with relevant experience based north of the border [to interact with].’
If you get in a taxi in Glasgow and say you work for Weir Group, everyone knows what you do. There’s a great deal of pride.
Christopher Morgan – Weir Group
For those facing the growing challenges of advising a large plc, that can be a real issue. ‘There is a large and diverse in-house community in Scotland,’ says Morgan, ‘but a significant component is representing public-sector, AIM-listed companies, private businesses or subsidiaries and divisions of global plcs. That means you’re not getting into the listing or listing-related issues in the typical GC discussions; and sometimes it’s not the same type of discussion you’d get from a meeting of plc general counsel.’
In 2009, Scots lawyer Cooke decided to address the need for more interaction among Scotland’s commercial-sector GCs by starting GCScot (a play on the GC 100). At that time Cooke was the only lawyer employed by Edrington, the distillers behind some of the world’s best-known brands of Scotch whisky, including The Famous Grouse and Cutty Sark blends and The Macallan and Highland Park malts. In 2008 the company had acquired the Dominican rum brand Brugal. The following year its international drinks distribution joint venture, Maxxium, was restructured after two of the initial partners, Vin & Sprit AB and Rémy Cointreau, decided to exit. This period of intense cross-border activity made Cooke acutely aware of his professional isolation.
‘I had been to some of the in-house events organised by the Law Society and while they did well to meet the needs of a big population of lawyers most of them did not work in a private company with international business. What existed didn’t address the needs of my specific constituency and I felt it would be worthwhile to have a forum for lawyers representing primarily Scottish-headquartered organisations with significant turnover and of significant size.’
GCScot has since become one of the best-known forums for Scotland’s lawyers. Although there is no website – ‘people use the internet too much these days’, Cooke asserts – and attendance is by invitation only, it has around 50 regulars, including most of Scotland’s top commercial-sector GCs. A group of acolytes have even started a spin-off for up-and-coming counsel – GCScot NextGen.
Membership of forums like GCScot has become a sought-after way of getting practical advice for Scotland’s GCs. As Shauna Powell, partner and group legal director at Clyde Blowers Capital – a private equity firm specialising in the mid-market industrials sector – points out: ‘External firms are great at telling you what the law says in a particular jurisdiction but they don’t need to make money in that market and they’re not faced with the issues our staff face on the front line in high-risk areas. You need to go beyond knowing what the law says and have a conversation about what it means to implement advice in practice, which you can only really get by discussing things with other GCs.’
Scotland’s somewhat balkanised legal community – financial services and tech in Edinburgh, oil and gas in Aberdeen, and manufacturing in the central and western belt – can make such note-swapping awkward, however. This has led in-house lawyers to experiment with new ways of sharing ideas. Greg Bargeton of William Grant – another of Scotland’s large private distillers that would comfortably make the main market if it were to float – says: ‘Because of the relatively low numbers of GCs and the physical difficulty of organising meetings there is an attempt to do something slightly leftfield and innovative. We’ve been focusing on forming very small groups with like-minded individuals to test our thinking on issues around compliance, modern slavery, and bribery. The results have been very positive. Within those small forums there’s a fantastic opportunity for trust to be established quite quickly and that gets things out in the open.’
A smaller legal community also has the advantage of creating a sense of professional bonhomie. Euan McVicar, GC and company secretary of The Green Investment Bank, certainly felt the benefits when he moved in-house. ‘When I came into the role I was surprised that a lot of senior people at large plcs were prepared to give up their time to help me. There’s a very collegiate atmosphere up here and even people you don’t know will tend to help.’
Law firms are also becoming adept at facilitating networks. Burness Paull runs its own GC club for senior lawyers in the financial services sector, and a number of other firms, including Brodies, Eversheds, DLA Piper, and Shepherd and Wedderburn were credited for making efforts to engage with GCs. Bargeton comments: ‘Firms in Scotland are getting quite sophisticated in the way they organise events now. They’ve moved on from the traditional CPD events to helping you build networks.’ Nevertheless, some GCs argue that Scots law firms are still well behind their English counterparts in facilitating such networking.
When I came into the role I was surprised that a lot of senior people at large plcs were prepared to give up their time to help me. There’s a very collegiate atmosphere up here.
Euan McVicar – Green Investment Bank
The Law Society of Scotland has made moves to improve its representation of the country’s in-house solicitors. In 2015 it established a new in-house lawyers committee (ILC), run by Graeme McWilliams of Standard Life, and recruited Beth Anderson as head of member engagement for in-house lawyers.
While its in-house membership remains dominated by government and public-sector lawyers – almost two thirds of Scottish counsel are employed in non-commercial roles, compared to just under one third in England and Wales – the ILC is trying to respond to the growing diversity of the profession. Says McWilliams: ‘There is a greater variety of in-house roles now and we need to differentiate between them when we hold events. We’re all feeling the pinch at the moment in terms of economic restraint and we need to fight the in-house corner as a group. We’re keen on promoting the future of the profession and helping companies develop in-house traineeships. The in-house commercial role is becoming so specific that it makes no sense to rely on people coming out of private practice all the time.’
The Scottish Empire
‘What makes Scotland different,’ says Martin Nolan, GC of Edinburgh-based Payfont, a yet-to-launch cyber security company that has already been valued at nearly £200m, ‘is simply the fact that the GC community – and indeed the legal community as a whole – is much smaller. You tend not to have that level of sector-specific familiarity with GCs that you would get in London, but that’s an advantage because you end up not operating in a bubble. You get exposed to a much wider range of backgrounds and concerns when you’re bouncing ideas around.’
While a smaller legal community gives Scotland-based interactions a distinctive feel, most of the country’s GCs are also plugged into London’s legal network. As Standard Life’s Abadan points out: ‘Being based in Scotland isn’t something I am conscious of as a day-to-day matter. Most large Scottish plcs have substantial operations down south. Ultimately, [interaction] is driven by the origin of your work, and for a lot of larger listed companies, it tends to be driven from London.’
Scotland’s GCs may not be particularly conscious of their location, but they often find that their counterparties are. As Powell comments: ‘People underestimate the talent that there is in Scotland. When we started raising our first formal fund in 2007 we were using a Scottish law firm. The placing agents asked if we shouldn’t consider using someone in London. We politely declined. There doesn’t seem to be a recognition of the depth of talent there is in this market.’
The M25-isation of the professional services market has made these views of lawyers based outside London the norm and, in truth, Scotland’s clout as an independent legal market has been weakened somewhat since the 2008/09 banking crisis with a string of City law firms taking over Scots practices and Edinburgh’s position as a financial services hub being challenged.
Perhaps the question we should ask is not why there are so few GCs based in Scotland, but why so many fight to find positions there. Quality of life plays a big part, but it is also the case that much of Scotland’s legal diaspora wants to return. ‘It’s quite common for lawyers trained in Scotland to move to London or elsewhere but many of them eventually want to move back,’ says Exova’s MacLennan.
Morgan, who was divisional GC of rail at Balfour Beatty in London before joining Weir, explains why he was among those looking to return. ‘There are a lot of quality of life issues associated with living in Glasgow, so to be able to hold an internationally-focused legal role here was a great opportunity. Working for Weir was also a big lure for me. If you get into a taxi in Glasgow and say you work for Weir Group, everyone knows what you do. We have been operating for 146 years. From a history point of view there’s a great deal of pride working for a company like this.’
Above all else, it is this internationalism that defines Scotland’s GCs. ‘The fact that there are fewer of us doesn’t make a difference,’ says Powell. ‘The issues GCs in Scotland are facing are no different to those faced in any other market. They’re operating at the same level as GCs based in London and probably with a broader mind.’
Morgan agrees: ‘What you lack in the network of potential peers you gain in the outward-looking viewpoint of the business community. Scottish companies have had to look outwards for hundreds of years. Their markets are not on their doorstep and you tend to have a very global outlook if you’re based in Scotland. Certainly the experience I’ve had of discussing things with other GCs here is that we all, as a community, have a very global outlook when it comes to legal issues.’
Unicorn spotting – How Scotland’s in-house lawyers are shaping the tech scene
With North Sea oil revenues plunging over the past year, the economic case for Scottish independence has been severely dented. However, according to Chris van der Kuyl, chair of 4J Studios – the company responsible for porting Minecraft to console format – oil could soon be replaced by something worth even more to the Scottish economy: video games.
Van der Kuyl’s valuation is clearly meant to catch the attention – global video game revenues reached just under $100bn in 2016, the oil industry is worth an estimated £35bn to the UK alone – but it does highlight a tech and creative industries scene that may surprise many outside Scotland.
The country’s video game developers have tended to form around Dundee: 4J Studios is based there, as was van der Kuyl’s previous company, VIS Entertainment; Edinburgh-based Rockstar North, developer of the Grand Theft Auto series, started out as Dundee-based DMA Design. In part this is a legacy of the old ‘Silicon Glen’, the electronics manufacturing industry that brought high-tech manufacturing jobs to the central belt of Scotland – the ZX Spectrum machines of the 1980s were assembled in Dundee – but the Dundee scene has also benefited from the support of government.
As Stuart Clarke, general counsel for the economic development agency Scottish Enterprise, observes: ‘Part of our strategy has been to play to Scotland’s strengths and the gaming sector in Dundee is one where we have targeted a lot of investment and attention. We recognise the scale of the opportunity the creative industries sector presents, but many of the most exciting companies are still too small to employ lawyers. It is our job to ensure they get sound legal and commercial advice from the start.’
FanDuel is perhaps the most celebrated tech company to benefit from the support of Scottish Enterprise. It became a rare Scottish ‘unicorn’ in 2015 after closing a $275m financing from a syndicate including Google Capital and Time Warner Investments that took its valuation over the $1bn mark. In spite of its success, few in the UK have heard of it. FanDuel’s fantasy sports games are mainly played in the US, meaning its chief legal officer Christian Genetski is based in Washington DC, with most other senior counsel based in New York.
The company has, however, retained its Scottish headquarters, being based in the same building as Skyscanner, whose unicorn credentials were recently gold-plated with a £1.4bn sale to Chinese online travel company Ctrip.
Supporting Scotland’s tech scene is something Skyscanner’s GC, Carolyn Jameson, has pushed personally. Jameson’s legal team runs a monthly drop-in clinic for companies affiliated with UK tech incubator CodeBase. ‘We are advising start-ups on the legal issues they may encounter as they go to market,’ says Jameson. ‘The law is an often overlooked bottleneck for fast-growing digital companies. From registering IP to forming partnerships and pitching for investment, there are a large number of legal questions that often get ignored before a company hits a certain size, and as lawyers representing a successful Scottish tech business we thought it was important to help address those issues at an early stage.’
While not all fast growth-companies will have in-house counsel, Martin Nolan, who recently became GC of Edinburgh-based cyber security start-up Payfont, says the situation is changing rapidly. ‘Five years ago it was unheard of to have in-house lawyers at a tech start-up, but the economic case for it is becoming stronger by the day. Start-ups are subject to an enormous amount of due diligence as they go through their journey and it’s important to be on the front foot with that and make sure you’re doing things properly.’
The idea of introducing tech start-ups to lawyers and other professional service providers has been notably developed by Scottish entrepreneur Duncan Logan, whose San Francisco-based accelerator RocketSpace has helped a number of companies achieve unicorn status. It is a model Nolan thinks will take off in Scotland.
We give our innovation teams that dynamic, garage-like environment to go and be creative.
Kenny Robertson – The Royal Bank of Scotland
‘Edinburgh in particular has lots of interesting businesses popping up and there are already a couple of tech accelerators here. With the right nurturing, funding and support it has the potential to be an amazing economy, but it will need some form of legal support from accelerators and other organisations. There’ll never be any less regulation, particularly in the tech space, and we will see more and more lawyers working at or with start-up companies that are going to launch.’
Established players with far more legal resources are also getting into the fast-growth tech market. Edinburgh-based Kenny Robertson, head of services legal at The Royal Bank of Scotland (RBS), is helping to lead the bank’s relationships with third-party vendors in the fintech space. In 2015 RBS opened a fintech innovation hub called Open Experience at its Gogarburn headquarters in Edinburgh. Based in Fred Goodwin’s old exec wing, Robertson describes it as ‘essentially a design studio’ that is ‘very different to the rest of the working space at the bank. We give our innovation teams that dynamic, garage-like environment to go and be creative, and we harness the results. We’ve got teams in there trying to establish quick go-to-market product cycles, often collaborating with large corporate customers, universities, venture capitalists and fintech start-ups’.
Even for Robertson, however, working with fast-growth companies has been a learning experience. ‘Approaching fintech suppliers with a long, sophisticated set of terms isn’t workable. There’s been a shift in approach whereby we’re engaging in much more dialogue with suppliers in the fintech space, to understand their views, experiences or skillsets. [The old way of] telling suppliers how it’s going to be isn’t going to allow us to leverage their experience or develop a collaborative relationship.’
One thing is certain: for Scotland’s younger generation of lawyers the country’s creative industries are likely to provide a larger share of in-house employment in the near future. As Stuart Clarke says: ‘There has been a dip in the number of listed companies up here and a conventional plc role looks set to be a less notable feature of the Scottish landscape, so the up-and-coming sectors are the really exciting place for me as both a representative of Scottish Enterprise and as a lawyer.’