Articles Posted in Showing Value

MetLife has published a handsome Annual Review 2007, which includes in its 33 pages one on its Legal Affairs group. Every activity described in the section marks a contribution by Legal Affairs of “critical support and guidance that enhanced MetLife’s corporate structure and investments, delivered innovative products to the market, and expanded compliance programs that protect the company.”

Terminology and orientation are important for legal teams. The MetLife summary always refers to “business partners.” The lawyers of Legal Affairs don’t advise clients, they pitch in shoulder to shoulder with their business partners (See my post of Oct. 8, 2007: banish the word “client”.).

Productivity metrics count at MetLife. The summary proudly notes that in 2007, “Legal Affairs supported capital-raising activities in excess of $12 billion and was instrumental in the formation of new entities.” Where possible, an impressive scorecard for a law department should detail quantified contributions (See my post of Feb. 25, 2008: practice area benchmarks with 24 references.).

An article from IP Law & Bus., Vol. 6, Sept. 2008 at 41, extols the changes the chief legal officer of LexisNexis, Kenneth Thompson, instituted after he took over in 2005. The division of Reed Elsevier soon “had a patent review board, an incentive program that rewards employees for inventions, an intranet site giving information on the patenting process and the incentive plan, and life-cycle management of the patents the company does obtain.” In addition, “In-house patent attorneys attend senior management meetings of business units and meet with researchers to actively find inventions to protect.”

Each of these initiatives is important for legal departments. This blog has material on all of them except life-cycle management (See my post of March 25, 2008: patent activities except litigation with 49 references.); and June 25, 2008: patent lawyers pay off.).

Just as no consensus has been reached about all the proper roles of a company, we have no final conclusion on the proper role of a law department.

Roles expected of corporations include to maximize profit (law departments are expected to minimize costs), increase market share (law departments should serve more internal clients and handle more work in-house), improve the community (legal departments undertake pro bono projects), promote diversity (ditto for law departments), conserve the environment (ditto), encourage personal growth (ditto), optimize productivity (ditto), and increase the quality of goods and services produced (ditto).

Roles expected of corporations conflict with each other and change over time. Ideology underlies everyone’s conception of those roles of both corporations and the law departments that serve them. The people who respond to those demands have different personalities and drives, and all of the mix changes over time. Likewise with law departments. The scope and depth of any law department remains malleable, with no chance that they will be set for long periods (See my post of Sept. 3, 2008: survey of the responsibilities of the general counsel.).

According to data collected in early 2007 from 84 multinational companies, the general counsel was almost as likely not to attend Board meetings at all as to attend any. Three-quarters of the respondents were from companies with headquarters in Northern Europe or the UK and Ireland and the results come from PLCLaw Dept. Quart., Vol. 3, April-June 2007, at 22.

Of the responding general counsel, 59 percent of them attend Board meetings, but the report does not indicate any average percentage of Board meetings attended by those who do. One interpretation is that they routinely or always attend Board meetings, but it is possible that the general counsel attend only when invited. The other 41 percent of the general counsel who responded do not attend any Board meetings.

I am unaware of any corresponding survey data for US general counsel, but I am confident that a much higher proportion of them participate in Board meetings. Many of them are corporate secretaries, for one reason (See my post of Oct. 2, 2006: should be part of the general counsel’s responsibilities; and April 13, 2007: to whom should the corporate secretary report.) and lawyers are more highly regarded as a corporate executive on this side of the Atlantic for another reason.

A brainchild of Brackett Denniston, the General Counsel of General Electric, is the so-called early-dispute-resolution program. According to Corp. Bd. Mbr., Vol. 11, July/Aug. 2008 at 76, “it has saved GE hundreds of millions of dollars in just three years — a figure that will grow to ‘billions saved, ultimately’”. The program measures litigation cost and impact and tries to reduce both by early case analysis and earlier dispute resolution (See my post Feb. 23, 2008 – ECA and 8 references.)

Denniston observes in the article that when you settle a dispute promptly you save your company on collateral damage, on frayed relationships, and on the burden litigation places on leadership. He is correct, but that does not make it easy to estimate the savings from prompt decisions about litigation.

Show us the methodology by which GE calculates those billions of dollars saved. If it holds up, all law departments who adopt these practices will be instant heroes in their companies and law firms in the US will wither.

A profile of the group general counsel of BAE Systems, Philip Bramwell, explains parts of his three-year plan to restructure the defense and aerospace giant’s 120-lawyer department. The piece appears in Legal Week, July 31, 2008 and praises the initiatives he has started.

What caught in my throat was an observation by the journalist (Leigh Jackson) toward the end: “It is clear that Bramwell … is intent on fostering an ambition and drive at his team that is still seldom seen in-house.”

Unambitious and plodding? That shot is unfair and unwarranted. Many in-house counsel, at least in US law departments, work hard and push themselves. The measure should not be private law firms, because once you reach partner, where is ambition? And what about all the associates who fall by the wayside of large law firms? I dislike patronizing and disparaging remarks about in-house (See my post of June 9, 2007: superior minds at law firms; Oct. 12, 2006: “little merit to a full-service law department”; Oct. 30, 2006: condescension by law firm partners; and Nov. 19, 2005: another patronizing British comment about law departments.).

In the briefest of mentions, the general counsel of Belgium-based InBev notes that her company has a three-year business plan and a “corresponding three-year plan for the legal function.” The huge gulp of Budweiser undoubtedly upended that law department’s plan!

In any event, the item from ACC Docket, Vol. 25, Sept. 2007 at 16, provides an opportunity to speculate on what a large, global law department (InBev has 50 lawyers) might cover in its three-year plan (See my post of June 25, 2008: 10 references to strategic plans).

1. Will our lawyers will have sufficient competency in areas of law that will be needed (See my post of May 23, 2008: core competency and 12 references cited.).

The NY Times, July 8, 2008, at C3, published a photo of InBev’s chief executive striding through the US Senate surrounded by a bevy of reporters. Prominently in the shot, looking determined with her briefcase is Sabine Chalmers, the general counsel of InBev, who is striding four steps ahead of the CEO.

I like the image and its inspirational message for general counsel: the top legal officer not just at the table (or in the hallway) but leading the way, energetic, focused, in charge.

A special supplement to the Fin. Times, June 9, 2006 at 5, delves into the views of CFOs on risk management. The two professors who wrote the piece had asked 334 CFOs “What fraction of your company’s value would you attribute to the finance function?” The average estimate was 10 percent of the value of the company and there was relatively little variation by region, industry or between public and private companies.

I am not sure what to make of the responses to that question if it were asked of a large group of chief legal officers. I can’t conceive how they would even begin to think about quantifying such a figure. If the figure has validity, it would bestow the ultimate measure of a law department’s value.

I would be fascinated to see how a group of CEOs rank the various support functions in terms of their contribution to the value of the company. Where would legal stand?

An article in the Harv. Bus. Rev., Vol. 85, June 2008 at 132-3, recommends five principles for companies that wish to fend off patent trolls (See my posts of Jan. 20, 2006: trolls and litigation costs; Oct. 29, 2006: Qualcomm’s business model; May 13, 2007: Microsoft’s patent litigation against trolls; and April 8, 2006: secret governmental patents.).

The fourth principle is for firms to “foster interdepartmental and intercompany cooperation.” One example cited cites law departments: “R&D departments that assign patent lawyers to projects from the beginning tend to produce higher-quality technologies, which they are then better able to protect.”

I wonder what proof the authors have for that statement. If the statement means that patent lawyers take more care to protect the ideas of inventors, that ought to be true. But do patent lawyers improve the actual invention?