Law Department Management Blog
Corp. Counsel, March 2010 at 82-85, sets out the fundamental metrics of Dynegy, a $3.5 billion operator of electricity power plants. The legal department has 20 lawyers. Its spending on external counsel in 2009 was $5.1 million, of which only $1.9 million was for litigation. Six law firms accounted for roughly 80 percent of Dynegy’s outside counsel expenditures. So, what do these benchmarks say about Dynegy’s legal function and has disclosure disadvantaged it?
Dynegy’s almost six lawyers per billion of revenue is unexceptional in either direction, neither too many nor too few (See my post of Feb. 25, 2009: lawyers per billion with 22 references and one metapost.).
If inside spending per lawyer matches general norms in the United States (about $450,000 per), then its spend of $9 million is higher as a percentage of total legal spending ($5.1 million outside) than most legal departments (See my post of March 29, 2009: 40/60 ratio of inside-to-outside spend with 18 references.). To that point, the more legal departments clamp down on external spending, the more this ratio will shift from the current norm of 40 percent inside. Also, external spend includes more than just law firms.
Dynegy’s ratio of 37 percent spent on litigation counsel is lower than the common figure of about 60 percent (See my post of Oct. 24, 2007: cascade of 60% for components of legal spending.).
The concentration of spending on a handful of law firms follows form these days (See my post of Feb. 16, 2008: convergence with 26 references.).
With all this disclosure, has Dynegy lost some proprietary advantage over competitors? A resounding No! Much of the data that progressive general counsel should keep does not have special cachet and does not justify secrecy and non-disclosure. You learn more from sharing data through benchmarking than hiding it.
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