Articles Posted in Structure

In a few companies, the corporate secretary function – support of the Board of Directors and its committees, corporate housekeeping for subsidiaries, sometimes shareholder relations – stands on its own, not as part of the law department or a report to the chief legal officer.

I do not think that structure is advisable. Legal judgments and knowledge are crucial to the function, so it ought to be part of the general counsel’s portfolio. Indeed, benchmark matrics back me: Most general counsel are their company’s corporate secretary.

LANXESS, a $2 billion spin off from Bayer Chemicals Corp., has four general commercial lawyers and three IP attorneys. The General Counsel, Marcy Tenaglia, has set up the law department of the specialty chemicals business in an unusual teaming structure. The arrangement divides the 15 business units and 8 service functions of LANXESS among teams consisting of one general commercial and one IP attorney. The two attorneys handle every matter as a collective, as if they were twin general counsel for the unit, according to GC Mid Atlantic, Sept. 2006 at 9.

In addition to this structural assignment, the law department has an attorney who is an expert in procurement as well as others who handle health safety and environment, a specialized federal act that pertains particularly to the company, and trademarks.

A piece from the UK, in Legal Week, Vol. 8, June 8, 2006, discusses the logic that combines legal oversight with government relations oversight. The article cites as examples the top lawyers in Europe of Microsoft (David Parker), McDonald’s (Julian Hilton-Johnson) and Dell (Richard Norman).

The lawyers cited in the article see legal work as aimed at day-to-day issues whereas government relations (corporate affairs) focuses on larger concerns: “setting a legal framework which is in the company’s best interests.” With laws and regulations all pervasive, that kind of public policy involvement can be crucial, and it is good that lawyers are perceived as the best people to coordinate two important concerns of corporations: law and public policy (See my post of Aug. 27, 2005 about Microsoft and lobbying and March 3, 2006 about its oblique connection to law.).

The 95 lawyers of Qualcomm consist of about 30 who “work in a half-dozen teams aligned with Qualcomm’s business units,” as described in Nat. L.J., July 17, 2006 at 8. For “many of those teams” the top lawyer reports to the head of the business unit. The other two thirds of the lawyers report to the general counsel and specialized, such as in litigation, complex transactions, and securities (See my posts of July 30, 2005 on dual reporting of specialist lawyers; July 31, 2005 on co-locating them with business unit lawyers; and Oct. 8, 2005 on keeping litigators separate from business unit lawyers.).

The decentralized reporting at Qualcomm stands out, but generally, one or more lawyers support a business line (See my posts of Dec. 21, 2005 on Ascential’s organization; July 31, 2005 on specialist lawyers within business unit groups; and March 22, 2006 on silos.) while the remaining lawyers uphold a functional specialty, such as bankruptcy, environmental or employment.

Other reporting structures have been discussed (See my posts of May 14, 2006 on Intuit and practice groups; and Feb. 15, 2006 on regions.).

Political, social and economic forces gradually but powerfully transform departments. Unlike the decisions of a general counsel or CEO, however, these three tectonic plates shift without being recognized in law departments’ strategic thinking. Here is a glimpse of how the three forces might have effect.

Political. A new administration alters regulations, judicial appointments, and legislative priorities (See my posts of May 15, 2005 generally about legal complexity; as well as on the same topic in more specific applications: June 28, 2005 and Aug. 27, 2005 regarding litigation; Dec. 14, 2005 regarding utilities, and Feb. 16, 2006 regarding tax.). Work and priorities change, and a law department may have to embrace more closely what is generally referred to as government affairs.

Social. Demographic changes mean that generations of workers have different values and differences (See my post of June 13, 2006 on Meyers-Briggs extroversion scores rising.). There are more women graduates from law school and more women in law departments, not to mention more diversity (See my posts of Sept. 4, 2005; Dec. 4, 2005; and July 18, 2006 on diversity.), older lawyers (See my post of March 16, 2006 on long-in-the-tooth veterans and knowledge loss.), more working spouses, and more resistance to overseas assignments (See my post of April 27, 2005 about Eastman Kodak; and Oct. 10, 2005 on ex pat costs.).

Naturally, the number of lawyers in a law department who report directly to the general counsel depends greatly on the total number of lawyers. That said, of the approximately 100 lawyers in Honeywell’s law department, 15 report directly to Peter Kreindler, the company’s general counsel.

This soupcon on structure, from GC Mid-Atlantic, May 2006 at 26, suggested for me a few comments. Are there also non-lawyers who report to Kreindler? For larger departments, does this 15 percent direct-report ratio hold elsewhere (such that a 50 lawyer department has between seven and eight direct reports)? Since Kreindler praises his team as a “smart and independent staff of attorneys,” does that allow him to have so many direct reports, the assumption being that he doesn’t have to manage them very much? Doesn’t the number of reports cast a pall on any one of them in terms of his or her likelihood of succeeding Kreindler?

When a law department has a matrix structure of functional generalists and legal specialists, checks and balances occur. There is an inherent tension which can be healthy for the law department (See my posts of Sept. 10, 2005 on specialist attorneys in large law departments.).

The specialists feel that the functional lawyers are always business-centric, as if the business unit lawyer goes native and the functional specialists counter-balance them.

Tension also can arise around the question of whether and when the business unit generalist should pass off a matter to a specialist, such as an employment lawyer or litigation lawyer. Is it a collaborative effort, or does the business unit lawyer control? The question then arises is whether the relationship lawyer is adding value, which is analogous to how much inside counsel add value when there are outside counsel.

The 25-lawyer legal and compliance department of Intuit transformed when the new general counsel, Laura Fennel, shifted its lawyers from supporting individual product lines to working in one of four practice groups. The practice groups cover commercial, global risk mitigation, intellectual property, and corporate and M&A, with each group led by a practice head. According to an article, posted on Law.com In-House Counsel from the Recorder, April 26, 2006 (Petra Pasternak), “the practice heads are now organized with a broad view of all of Intuit’s businesses.”

Compare these practice groups to groups of lawyers supporting a business line (See my posts of Dec. 21, 2005 on Ascential’s organization; July 31, 2005 on specialist lawyers within business unit groups; Oct. 8, 2005 on litigation and business unit lawyers; and March 22, 2006 on silos.) and to groups of lawyers with a functional specialty, such as litigation, bankruptcy, environmental or employment (See my post of July 30, 2005 on dual reporting of specialists.). The Intuit practice groups span all of Intuit’s business lines and probably integrate more than one legal specialty (See my post of Feb. 15, 2006 on yet another structural orientation: regions.).

When Seth Jaffe arrived at Williams-Sonoma in 2002 as its general counsel, “the legal department was not involved in HR matters,” notes Counsel to Counsel, May 2006 at 27. The legal issues arising from the company’s 25,000 employees (a number which swells to 40,000 during the annual holiday season) “were handled directly between HR and outside counsel.” Jaffe changed that and his department took over internal HR legal responsibilities.

Most law departments in the US handle employment related matters, albeit in tandem often with outside counsel. To the internal specialist, if there is one, goes the first call from HR if legal issues arise (See my posts of Feb. 9, 2006 on Intel and HR controls lawyers; Jan. 17, 2006 (3#) on Burlington Coat Factory and 1 employment lawyer per 25,000 employees and Feb. 9, 2006 on ABN Amro hiring its first HR lawyer; Jan. 6, 2006 on other HR metrics; Nov. 19, 2005 on employment litigation statistics in the US and Feb. 12, 2006 in Europe.).

Deep in a story about Computer Associates’ law department, Corp. Counsel, Vol. 13, April 2006 at 93, nestles this sad description of the 50-or-so-lawyer department’s one-time configuration:

“The office itself was poorly organized, an impersonal, wide-open space with cubicles, where even the most privileged conversations were easily overheard. Lawyers had desks, but few had offices, so they had to keep confidential documents locked in drawers at all times.”

No doubt, desks for lawyers is a best practice. The new general counsel, Kenneth Handal, set about to give lawyers private offices, “neatly stenciled lettering on glass doors,” and “conference rooms designated for exclusive use by the legal staff.” Many in-house attorneys do not know how fortunate they are.