Articles Posted in Thoughts/Observations

Guest blogger Jeff Kaplan writes that “SEC Rules of Part 205 – based on Section 307 of Sarbanes-Oxley – requires attorneys practicing before the SEC to take certain actions if faced with evidence of a securities law violation. When first enacted, the SEC standards caused many law departments to issue policies for both their in-house and outside attorneys and to undertake various related measures (including training and establishing compliance committees).

But are law departments still concerned enough about these standards to take even minimal steps to promote compliance with them?

At a PLI compliance institute this week, I asked the audience: If you are in a law department, do you regularly send your [Sarbanes Oxley 307/205] policy to newly retained law firms? Of twenty responses received, nineteen were No. An article in the Georgetown Journal of Legal Ethics, Sonne, “Sarbanes-Oxley Section 307: A Progress Report on How Law Firms and Corporate Legal Departments Are Implementing SEC Attorney Conduct Rules,” (Summer 2010), similarly indicated a lack of attention to the rule by law departments.

Some linkages exist between the shares of a publicly traded company and the actions of its legal department. Most of the connections are tenuous. A few posts have mentioned earnings per share (See my post of Sept. 7, 2008: doubts about usefulness of EPS; Jan. 7, 2009: total shareholder return and market cap growth as possible benchmark metrics; and April 24, 2009: equity-based denominators for benchmarks.).

Market capitalization has gotten a nod or two (See my post of May 26, 2007: market capitalization as benchmark denominator; July 2, 2007: total legal spending in relation to market capitalization; and May 27, 2008: market value in relation to intangible assets of a firm.).

Prices of shares and litigation have some interaction (See my post of June 5, 2006: general counsel and their influence on share price; and Jan. 18, 2009: share prices, event studies and litigation with 6 references.).

Back references of six or more collected on a topic (See my post of Sept. 16, 2010: Part LXI.).

1. Accruals (See my post of Oct. 5, 2010: accruals with 6 references.).

2. Complacent firms (See my post of Sept. 23, 2010: entrenched and content firms with 7 references.).

1. 18 lists on Twitter that include this blog and an analysis of their reach (Aug. 3, 2010)

My tweets on 18 lists that follow 4,150 Twitterers but have 470 people following them.

2. Will the numbers reported on alternative fees please stand still a moment? (Aug. 5, 2010)

Number of legal departments in the US. According to Intellectual Prop., Fall 2010 at 48, “There are 30,000 companies in the United States that have at least 100 employees.” If so, it is very hard to imagine as many as 20,000 legal departments since many of them are likely to be at the small end of the spectrum (See my post of April 30, 2010: estimate of 20,000 US law departments.).

Another measure of currency exchange rates. Corporate Counsel uses the Federal Reserve average exchange rate for a year to convert foreign currencies. That might be a good standard for benchmarks. Also, if law firms bill in their local currency and you pay in that currency, the exchange rate complications mount when you convert your spend into your company’s base currency (See my post of June 5, 2009: currency conversion with 6 references.).

Open positions in law departments. This blog has been almost completely mute about open positions in legal departments (See my post of Dec. 2, 2007: posted open positions at TimeWarnerCable.). Fewer of them exist now, I suppose, after the headcount cutting of recent years.

The Economist, Oct. 2, 2010 at 72, draws on data from the World Intellectual Property Organisation to show that patent applications in 2009 were 450,000 in the United States, 350,000 in Japan, 310,000 in China and 140,000 in Europe (my estimates from a chart). Small wonder that translation costs are so high and that IP-focused legal departments have dozens of foreign patent agents.

The article also mentions that Chinese companies “pay foreign companies more than $10 billion in licensing and royalties annually, and that amount has been growing 20% a year.” Increasingly, IP activity doesn’t stop with obtaining a patent, but continues with licensing arrangements.

On another point, the article notes that American patent filings show a foreign co-inventor on nearly 40% of all applications. This gives a glimpse of the immigration work involved for many high-tech companies as well as the globablization of research and development.

Both are tools for management that have distinguished pedigrees. Every general counsel creates budgets and most should seek benchmarks from time to time.

Both offer more insights to those comfortable with mathematics. Percentage change, compound annual growth rates, correlations and other math methods fly in formation.

Both are attacked for definitions, consistency, and methodological purity. If people don’t like the message, they challenge the method.

Retirement formulas, such as 50 years old and 15 years of service. When general counsel worry about loss of talent, one of the considerations is the age of lawyers in the department and whether they are eligible for retirement. Companies have different formulae, one of which is summarized in the header (See my post of April 20, 2009: retirement of in-house lawyers with 8 references.).

Anonymous, confidential and unnamed. With most lists of participants in benchmark surveys, some asked to be kept anonymous. All of them want complete non-disclosure of their specific data. A third category, however, includes legal departments whose data is available from a third source for the benchmark set but whose identity is not revealed (See my post of May 24, 2010: anonymous participants and confidential information.). Those are the unnamed.

For surveys, even the names of companies can be problematic. One of the companies in my benchmark survey is 盛虹集团有限公司. I Googled those Chinese characters and found out that one translation of the company name is Sheng Hong Group. Is that a fair, non-chauvinistic way to refer to it? What if a company from Saudi Arabia operates with a name in Arabic?. My participants from Portugal have lost all their accent marks. Nothing goes simply for the intrepid benchmarker!

Natural log one of metaposts with references (See my post of Aug. 9, 2010: Part XLX.).

1. Africa (See my post of Sept. 8, 2010: Africa with 9 references.).

2. Benchmark survey of General Counsel Metrics (See my post of Sept. 6, 2010: GCM study with 36 references.).

No one has written to say that my retrospective selections have any value, but I keep doing them – with thumbnail summaries – because it pushes me to rethink my material and consider priorities of ideas. Your thoughts by email?

Could a law department declare 10-11AM as quiet time, with the goal of no internal calls, visits or emails? (July 12, 2010)

Declare a mental moratorium for interruptions.