Articles Posted in Structure

“At Hilton, I or another member of law department executive management team personally visited our locations with lawyers at least once every three months (or have the lawyers visit headquarters).” Tim Glassett, the former general counsel of Hilton Hotels, explains that in E. Leigh Dance, Bright Ideas: Insights from Legal Luminaries Worldwide (Mill City Press 2009) at 18 (See my post of July 16, 2009: globe-trotters need stamina.).

Many law departments these days have dispersed their office locations to be near business units (See my post of Sept. 16, 2008: foreign locations of in-house counsel with 11 references.). To keep those distributed members feeling part of the team, not to mention to coordinate substantive legal practices and manage personnel, senior managers in legal departments become “have passport, will travel.”

Three functional dimensions of a multi-national law department: “general business lawyers with global responsibility, legal specialists in the core legal fields for the company’s operations, and in-house lawyers on the ground in the main jurisdictions where the company conducts its business.” This is the three-way division of in-house counsel envisioned by Jan Eijsbouts, the former general counsel of Akzo Nobel, in E. Leigh Dance, Bright Ideas: Insights from Legal Luminaries Worldwide (Mill City Press 2009) at vi.

As I interpret his description, Eijsbouts recommends big-picture lawyers that oversee global legal issues, substantive subject matter experts that serve as a shared service for all the lawyers, and generalist commercial lawyers in the field serving business units. That is a broad division of responsibility that makes sense.

In Inside Counsel, June 2009 at 54, Peter Wexler explains why he changed the decentralized structure at Schneider Electric to one where its practicing lawyers all report to him. The department has 90 lawyers, in 31 locations in 23 countries (See my post of April 25, 2009: more about Wexler.).

1. “The hiring often was done without a full understanding of what skills and experience were needed.” Non-lawyers may be less able to discern appropriate legal talent or know what to pay them.

2. “The new lawyers were not exposed to corporate training and lacked an internal network for sharing advice (See my post of July 13, 2009: train foreign lawyers at headquarters.).

Previously I collected my posts on direct reports, decentralized reporting, and reporting lines other than decentralized (See my post of May 29, 2009: direct reports to the general counsel with 12 references; Aug. 5, 2008: decentralized reporting with 7 references; and Jan. 12, 2009: reporting other than decentralized by lawyers, with 13 references.). The topic of reporting is not exhausted.

Two other reporting topics remain to be aggregated: dotted line reporting and matrix reporting. As to dotted line, a few posts refer to two specific departments (See my post of May 7, 2006: GE; and Sept. 19, 2009: Bombardier.). Other posts delve more broadly (See my post of March 1, 2006: functional and dotted line reporting; Sept. 10, 2005: paralegals; Nov. 19, 2007: global legal departments; and March 5, 2008: org charts can show dotted lines.).

A related term for multiple reporting lines, which are sometimes expressed as dotted line and solid line reporting, is matrix reporting (See my post of Aug. 27, 2005: “double solid line matrix”; Feb. 15, 2006: the bane of combining reports; June 24, 2007: Cadbury Schweppes; and May 21, 2006: business lawyers and legal specialists; and May 2, 2008: Siemens’ reporting lines.).

The larger the legal department, the more likely it has its own employees support at least some of its software and hardware. No data exists that I know of that tells us the tipping point, where departments typically hire their own technology talent. Most legal departments, and all smaller departments, rely on personnel from the corporate IT function for their support, training, and development needs (See my post of June 16, 2009: Information Technology staff group with 23 references and 1 metapost.).

There are advantages and disadvantages to each solution. If you have in your department’s headcount one or more information systems staff, it:

1. Raises your fully-loaded cost per lawyer;

Dealings between lawyers and the finance function within a company cover many topics (See my post of Dec. 7, 2005: interactions of Legal and Finance; Nov. 23, 2008: RACI roles for Finance; Sept. 14, 2005: lawyer-client privilege and information sent to accounting; March 12, 2005: law department paid for some software because it reduced reserves; March 18, 2007: six posts on reserves and two on accruals; and Nov. 5, 2006: accounting personnel handle law firm invoices.).

The rule-making authority of Finance manifests itself in several posts on this blog (See my post of April 17, 2006: when to create some matters; Nov. 10, 2007: three-way approvals of invoices, including Finance; April 13, 2009: invoice authorization levels; and Dec. 2, 2007: purchase orders,). Budgets from the legal team are the particular concern of Finance (See my post of Nov. 25, 2005: budget of legal department set by Finance; Jan. 25, 2006: CFOs demand budgets months in advance; and Nov. 13, 2007: Dell negotiates budget with Finance.).

Some companies compare the legal group and the finance group on benchmarks (See my post of April 9, 2005: finance, IT and HR benchmarks; Sept. 4, 2005: total spend as a percentage of revenue for staff groups; April 6, 2008: benchmark against Finance; and June 26, 2008: Finance contributes 10% of company’s value.).

Some 240 general counsel responded to a survey conducted by FTI Consulting, the results of which are in Corp. Bd. Mbr., Vol. 12, 2nd Quarter 2009 at 51. One question on the poll was “Should the general counsel be considered the chief ethics officer?’” Three-quarters of the respondents agreed; no data is given regarding whether the remaining quarter disagreed or had no view.

I am not sure what a chief ethics officer does, although this blog is replete with references to ethics (See my post of Oct. 7, 2008: ethics with 29 references.). My sense is that ethical considerations move in a different direction than compliance, the latter being adherence to laws and regulations, the former (ethics) being enforcement of fundamental moral principles such as fairness, honesty, and responsible dealings. The domain of “corporate social responsibility” seems to me to extend ethical behavior beyond the corporation, to the larger community around it.

Whatever the boundaries, to be a company’s ethics czar assumes a large and diffuse responsibility for a general counsel.

Bill Casazza, the general counsel of Aetna, “oversees the work of about 300 people. Seventy are lawyers,” according to Corp. Bd. Mbr., Vol. 12, 2nd Quarter 2009 at 47. Since the ratio of lawyers to non-lawyers in most US law departments stands typically around one to one, Aetna’s legal team probably includes compliance professionals, indeed possibly more of them than lawyers, paralegals and secretaries.

When lawyers amount to something like a quarter of a legal department it becomes more difficult to involve everyone equally in departmental off-sites, because it is harder to pick topics that have relevance to everyone. It is also harder to sustain a one-department culture when members have widely differing backgrounds and tasks. There is a further risk that some group will feel second class (See my post of March 26, 2005: compliance staff as second class citizens.).

Like other corporate staff groups, IT supports the legal group and is supported by them, such as with contracts issues (See my post of Nov. 23, 2008: IT licensing contracts; and May 22, 2009: adherence by legal to corporate IT standards.). They team on some responsibilities, such as e-discovery (See my post of Oct. 11, 2008: ESI assistance; Aug. 26, 2008: responsibility for data maps; and April 27, 2008: Kraft team included IT partners.).

Mostly, however, general counsel often bemoan the lack of support they get from corporate IT (See my post of March 26, 2006: law is a low priority for corporate IS; Jan. 21, 2008: why law departments get short shrift from corporate technology services; March 26, 2006: IT departments and ASP’s in terms of support; April 26, 2006: IT referees the decision regarding ASP; and Feb. 25, 2009 #2: ASP to SaaS.). Even with the griping, most software customization projects involve corporate IT (See my post of June 3, 2009: software written specifically for legal departments with 12 references; and July 18, 2006: the usual process of a requirements definition.).

No one can definitively resolve the debate about which support approach is better: support from the company’s IS group or support from members of the legal department (See my post of Dec. 7, 2005: IT supports law; and March 25, 2009: claim that the best law departments have their own IT staff.). The approach chosen is usually more due to the size of the law department and its technology ambitions than to any considered strategic analysis. Some benchmark data even exists regarding support levels (See my post of Aug. 27, 2005: one IT support person for every 24 people in the legal department; Dec. 23, 2005: less than one for every 35 people; and Aug. 14, 2005: spending of $4,000 per lawyer.).

Jeff Kaplan: In many companies, the answer is either the general counsel or chief compliance officer. But a better answer – because it is more consistent with governmental expectations and best practices – is all of a company’s senior managers.

The key legal standards – meaning the Corporate Sentencing Guidelines, which are used (among other things) to determine whether to indict companies for the acts of their employees or agents – cast a broad net when it comes to managerial accountability for compliance. First, senior managers must ensure that their organization’s compliance program is effective. Second, they must be knowledgeable about the content and operation of the program. Third, they must exercise due diligence in the performance of their duties. Finally, they must “promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.”

Moreover, high-ranking enforcement officials – such as the head of the Department of Justice’s Fraud Section – have identified senior management support as one of the key factors that the government examines in assessing the effectiveness of a company’s compliance program. And, the experiences of companies with best-practice programs have long demonstrated the importance to program efficacy of all of a company’s senior managers truly being held responsible for compliance.