Practicing lawyers within a company should report to the general counsel (See my post of May 30, 2005: risk otherwise to attorney-client privilege.). So classically legal functions are clearly in the fold:
1. Contracts (See my post of May 5, 2006: contracts with 15 references.)
2. General legal counsel
This blog has said very little about initiatives by companies, through the efforts of their law departments, to influence prospective legislation and change existing legislation. These endeavors are generally called “lobbying” (See my post of March 3, 2006: lobbying; March 3, 2006: lobbying’s oblique relation to law departments; Aug. 8, 2006: European GCs intertwine legal and corporate affairs; and July 18, 2006: political events affect law departments through government affairs.). Undoubtedly there are enormous nuances in that term, as an entire industry helps companies shape the legislative and regulatory landscape.
A few posts recognize that some legal departments have responsibilities in the arena referred to as government affairs, which complements lobbying (See my post of Aug. 27, 2005: Microsoft; June 7, 2006: MedImmune has government affairs managers in its law department; and Aug. 14, 2006: Mellon Bank general counsel oversees government affairs.).
Corporate governance issues rank high on the list of concerns law departments know they should address (See my post of Aug. 14, 2005: CEOs think general counsel should spend more time on governance; March 6, 2005: governance as a challenging area of law; July 25, 2005: legal risk and governance advice by European general counsel; May 10, 2006: Canadian law departments concerned with corporate governance; Dec. 16, 2005: Alcoa’s general counsel devotes about 15% of his time to corporate governance; and Nov. 8, 2007: Enterprise Risk Management and corporate governance.).
The reporting structure of governance group is up for grabs (See my post of Feb. 17, 2007: frequency of corporate governance positions; Feb. 18, 2007: Chief Governance Officers; and Feb. 10, 2005: law departments and Chief Governance Officers; and Sept. 10, 2005: Motorola Chief Governance Officer.).
Various organizations rate companies on the quality of their corporate governance (See my post of Dec. 4, 2005: governance ratings organizations; July 5, 2006 # 2: governance rating groups; July 5, 2006: assessment groups; and Oct. 1, 2006: law department collects governance ratings.).
In-house counsel represent the company, not individual employees of the company. So runs the mantra, and it is true. A recent survey, however, published in Corp. Bd. Mbr., Vol. 11, July/Aug. 2008 at 86, extends the scope of whom the hard-pressed internal lawyers represent. One of the questions asked of the nearly 700 directors and general counsels who shared their views on boardroom issues for the magazine and FTI Consulting asked “To whom is the general counsel primarily responsible?”
Of the directors who responded, 40 percent said it is the CEO to whom the top lawyer owes top allegiance. The general counsel who responded had different views. All that the article states, in the following sentence, is that “The GCs kind of copped out, with 35% of them saying they should be equally accountable to the CEO, the board and the shareholders.” I guess the other two-thirds feel they are primarily responsible to the CEO or the board.
In early 2007, 84 general counsel of “leading multinational companies” submitted survey data on the functions that report to them other than traditional legal functions. The general counsel are largely from companies with their headquarters in Northern Europe or the UK and Ireland and these findings are from PLCLaw Dept. Quart., Vol. 3, April-June 2007, at 26.
The four additional functions that report to the general counsel all show approximately the same percentage:
“Intellectual property management” (63.4%) (See my posts Dec. 6, 2006: no proximity argument for patent lawyers reporting to R&D; Feb. 19, 2006: patent lawyers and R&D managers; Feb. 27, 2007: should the GC oversee IP; March 23, 2008: Patent Review Committees; and June 25, 2008: patent lawyers pay off.).
In the United States, many general counsel also serve as the corporate secretary. Hence, among other tasks of that role, they are responsible for minutes of Board meetings, corporate governance documents, and the logistics of the Board (See my posts of Dec. 12, 2007: with references to corporate secretary; April 12, 2006: three-quarters of US GCs are the corporate secretary; Oct. 2, 2006: general counsel who assume this responsibility; Nov. 1, 2005: necessity of that title in the United States; March 13, 2007: unusual at EMC where law firm lawyer is corporate secretary; and March 9, 2007 #4: a position description.).
UK general counsel who have this responsibility are referred to as the “company secretary” (See my posts of Nov. 12, 2007: UK GCs want to be on the Board; and Nov. 9, 2006: reporting lines of European company secretaries.). This blog has commented on other aspects of the UK position (See my posts of April 13, 2007: reporting lines; and Aug. 27, 2005: separate functions at Cadbury-Schweppes.).
Vendors provide goods and services for corporate secretaries (See my posts of July 19, 2006; Aug. 9, 2006, Jan. 24, 2006; Oct. 1, 2006; Oct. 29, 2006; March 1, 2007 #1; Feb. 14, 2007; cottage industry; March 9, 2007 #1; and April 22, 2007: all on specialized software for the function.).
Regarding assignment of structure and responsibilities, the three most common choices from a recent survey were “mainly by business area or product line” (25.3%), “mainly by area of law” (25.3%) and mainly by geographic area (16.9%). This data dates from early 2007 when 84 companies responded to an online questionnaire addressed to general counsel of leading multinational companies. Three-quarters of the respondents are from companies with their headquarters in Northern Europe or the UK and Ireland (See my post of Nov. 9, 2006: previous survey results.). PLCLaw Dept. Quart., Vol. 3, April-June 2007, at 24, presents the data and gives rise to several observations.
No best practice exists for how general counsel of large law departments assign areas of responsibility to their lawyers. The split is fairly even between a business unit orientation, a traditional legal-issue orientation, and a part-of-the-world orientation.
Most law departments strike a balance. Smaller slices of the pie chart shown cover hybrids: “partly geographic and partly area of law” (15.7%), “partly geographic and partly product line” (9.6%), and “partly product and partly law” (3.6%).
The law department of Sarah Lee has 30 lawyers in 11 offices worldwide. That description comes from Corp. Bd. Mbr., Vol. 11, July/Aug. 2008 at 80, in a piece on its former general counsel, Rick Palmore. Palmore has recently moved to General Mills to lead its law department.
Two observations struck me as I read about the far-flung Sara Lee department. First, given that the company has a headquarters in or near Chicago, where a recent directory lists five lawyers and a second location with three lawyers, the remaining 22 lawyers in nine offices average slightly more than two per office. That ratio of around two lawyers per non-headquarters office is perhaps what many global law departments are moving toward as they scatter their staff near their clients and operations.
The second observation is that all the lawyers reported to Palmore. Sarah Lee is not a company that has decentralized reporting of its business unit lawyers to executives of business units (See my posts of Feb. 19, 2006: in-house lawyers risk “going native” compared to “independent” outside counsel; Jan. 1, 2006: decentralized reporting of business unit lawyers at General Electric; July 25, 2005: the same at AXA; March 17, 2006: the same at HSBC; May 20, 2005: attorney client privilege at risk when line lawyers report to business managers; and March 1, 2006 and Aug. 27, 2005: double reporting lines of lawyers at John Deere, Nokia, and TIAA-CREF.).
In the midst of a profile of Leonard Kennedy, the General Counsel of Sprint Nextel, Corp. Bd. Mbr., Vol. 11, July/Aug. 2008 at 79, the author refers to the 2005 merger of the two companies. Kennedy, who had been the GC of Nextel was put in charge of both legal departments. “In blending the legal groups, Kennedy trimmed a combined total of 300 people to 209.”
Those layoffs amounted to 30 percent of the combined law departments, a cut in line with those of other mergers (See my posts of May 10, 2007: Clayton Holdings; Sept.13, 2005: Honeywell and Oracle; Feb. 19, 2007: BellSouth/AT&T; and May 5, 2008: turnover after mergers.). Post-merger law departments inevitably shrink from the total of the pre-merger departments
Kennedy also had his staff look hard at the 2,000 lawsuits pending at the time of the merger. In the next couple of years, the law department shrank that caseload to less than 750 by winning cases, getting some dismissed, and settling a lot of class-action suits. It is an excellent practice for a law department to review its portfolio of litigation and prune it.
This blog has commented on relocations of lawyers (See my post of May 25, 2008 – 7 posts.)
but the topic is not even remotely fully covered. An advertising section www.fortune.com/adsectins in Fortune, July 2008 at S7, lays out data from GMAC’s 2008 Global Relocation Trends. That report ranks the relocation obstacles companies face, which presumably apply to law departments.
The ten obstacles are “finding suitable candidates” (21%), “career management” (16%), “partner dissatisfaction” (10%), “policy exception control” (10%), “return on investment” (8%), “relocation reluctance” (7%), “adjusting to environment” (5%), “intercultural understanding” (4%), “education concerns” (4%), and “safety & security” (3%).
Law Department Management Blog