Articles on Structure

Projections regarding the number of law departments in countries need to bear in mind local mindsets

Tax policies, employment laws, and cultural predispositions discourage companies in some major countries from growing much.  In Spain, according to Fortune, July 23, 2012 at 16, and as holds in Italy I believe, very small firms are disproportionately represented as compared to the United States.  It is much easier for reasonably-sized companies to sustain a legal department.

 

Thus, some of my elaborate estimates of the number of law departments around the world – based on population or GDP, for example – may be seriously flawed if business conditions or cultural styles limit the number of companies that reach law department size.

The shape of things to come: in-house lawyers around the world, where revenue comes from

A third of VF’s revenue comes from international sales, according to Corp. Counsel, July 2012 at 38, and five members of its 18-person legal department are stationed outside the United States.”  VF Corp. is the world’s largest apparel and footwear company.  It makes sense that a company that does business and sells shoes everywhere should have the same proportion of its lawyers serving internationally (really, “boots on the ground”).

 

This blog refers often to the geographic scattering of law department offices and the likely trend in this direction (See my post of Jan. 16, 2009: physically decentralized law departments with 13 references.).  The term “footprint” figures notably in these references (See my post of June 20, 2008: geographically dispersed lawyers and a tool to help them reach each other; Jan. 8, 2009: location of in-house counsel will eventually match the global footprint of a company; Dec. 13, 2009: InBev lawyers where the business is; March 2, 2010: 3M and dispersion of its lawyers; Aug. 9, 2011: international footprint of Cargill lawyers; Oct. 19, 2011: management tools needed as law departments disperse; and April 16, 2012: John Deere and its Asian presence.).

Some managerial consequences of a large and widely-distributed legal department

The law department of United Technologies has approximately 275 in-house lawyers.  Aside from those based at the company’s headquarters in the United States, approximately 250 work from 79 locations and 20 countries!  This information on geographic spread comes from GC Insights: What Multinational General Counsel Value Most (ACC 2012, supplement to ACC Docket) at 40.  For legal departments with many lawyers dispersed, what sorts of management challenges arise?

 

You need to stress clear communication.  You need to be cognizant of language limitations for some of your lawyers (See my post of April 27, 2005: second languages required for Kodak lawyers; Aug. 26, 2006: Mary Kay and poly-linguists among its lawyers; April 27, 2007: knowledge of a foreign language helps for job rotations; April 26, 2008: managing lawyers who do not speak English as a primary language; Jan. 11, 2009: reasons to hire your own lawyer for an overseas office; and Aug. 13, 2009 #5: translate only key provisions of contracts in a foreign language.).

 

You need to keep widely-different time zones in mind when you schedule calls.

 

You need more technology to keep in touch, to share knowledge, and to communicate.  Video-conferencing comes to mind, but also wikis and law department intranets and video cams.

 

You need to work harder at articulating standards, shared culture, and expected ways of working.  If you rotate lawyers in the field back to the main campus, that helps (See my post of Aug. 4, 2007: Rhodia’s practice of job rotations.).  So do Centers of Excellence.

 

You need skilful and tolerant talent management as there will be different educational backgrounds, aspirations, work experiences, not to mention management styles.   Compensation differences can be thorny to resolve.

 

You need to recognize and cope with the inevitable tensions between “Headquarters” and “the field.” (See my post of June 17, 2008: steps headquarters lawyers can do to keep field lawyers feeling part of the team; and July 8, 2011: tensions between HQ and field lawyers.).

 

You need to accept more travel, if only to periodic meetings of all or some of the lawyers.

A method to quantify co-location of in-house lawyers, and thus their value to the company

Let me propose a metric to show a law department’s value, based on the degree to which its lawyers are based in countries in proportion to the revenue from that country. In that regard, during the past two years, this blog has commented on several law departments with many locations of their lawyers (See my post of Jan. 12, 2012: P&G with 20 sites; March 28, 2011: Google with 21 and AB InBev with more than 20; and June 8, 2011: Wellpoint with 28 locations.).

The blog has skirted the quantification I am here proposing (See my post of Nov. 20, 2007: global law department if it has 10+ locations outside HQ country; Dec. 31, 2010: the “nerve center” where many specialist lawyers have offices; Feb. 28, 2012: attorney-client privilege headaches of multiple foreign offices; Oct. 17, 2011: dispersed lawyers characteristic of concentrated global industries; and Nov. 24, 2011: law departments of non-U.S. companies are more likely to be geographically dispersed.).

We could measure proximity of counsel to corporate revenue. If the proportion of a company’s revenue that comes from a country (or a region) matches the proportion of its in-house attorneys based in that country or region, the metric would be 1. To the degree that lawyers don’t follow the money, that number will decline (See my post of April 16, 2012: locate lawyers where revenue, and thus legal work, is generated.). For example, if 10 countries each account for 10% of a company’s earnings, but all its in-house lawyers are in one of those countries, the metric would be 0.1.

Widening roles of corporate counsel over five years, according to Deloitte survey

Deloitte’s Global Corporate Counsel Report 2011 shows a chart, based on data from nearly 900 in-house respondents around the world, of the “Responsibilities of Corporate Counsel.” The data pertains to the various functions general counsel oversee. For each of eight areas of responsibility, the percentage of respondents who have the responsibility increased from the figures of a comparable study five years before. An odd pattern, by all means.

The eight areas include five typical ones and three unusual ones. Regulatory compliance, company secretarial, risk management, ethics or whistle-blowing, and department management are commonly the general counsel’s charge, in addition to legal services.

Much less common, and therefore noteworthy for having been included in the Deloitte study are “directorship of subsidiary,” “strategy development,” and “project management.” If “strategy development” pertains only for the legal team, nothing stands out. But if it broadens to company-wide strategy, I am surprised at the increase. The same interpretive distinction applies to project management. To be a director of a subsidiary is a new responsibility for me to hear about. It confounds me why the frequency of all eight roles has increased.

A controversial recommendation by a consultant to rotate business unit generalists periodically

The veteran consultant Richard Stock wrote a column for the Canadian Corporate Counsel Association’s quarterly, Leading Corporate Counsel, Fall 2010. Summarizing some of the action tips put forth in a metrics study, the ACLA-CLANZ Legal Department Benchmarking Report, Stock cited one on alignment.

“Rotate lawyers’ alignment away from half of their business units every three years for coverage and effectiveness.” I think this means that lawyers who support a commercial group should do so for three years, no more, and then be reassigned to support a different group. The logic might be to deepen the experience of commercial lawyers and to avoid their “going native” (See my post of Feb. 19, 2006: in-house lawyers risk “going native” compared to “independent” outside counsel.).

Others, quite possibly, would disagree with this advice. They want their commercial lawyers to immerse themselves in the legal issues of the business units they support and they would not want to arbitrarily yank them out of that accumulated trust, familiarity, and strategic knowledge.

U.S. general counsel rank higher in their company than do their non-U.S. counterparts

Deloitte’s Global Corporate Counsel Report 2011 presents data from almost 900 in-house counsel in 10 countries. Only 49 were from the United States. Of that subset, 86% are a member of the company’s senior management team (at 6). Evidently a much lower percentage holds for counsel outside the U.S., since the figure for the entire survey population – increased some by the U.S. figures – was 62%. Hence, the top lawyers of non-U.S. companies for the most part don’t occupy the rank of their American counterparts.

That said, 13% of the total respondents are members of their company’s board of directors, whereas only one of the U.S. corporate counsel is (2%). An earlier survey, drawing mostly on general counsel in Europe, found otherwise (See my post of May 14, 2006 #4: in Canada, one fourth of general counsel sit on Board; Nov. 9, 2006: percentage of Board member GCs was dropping in Europe; Dec. 12, 2007: more than half of UK general counsel want to be a board member; and Aug. 6, 2008: non-US general counsel often do not attend any Board of Directors meetings.). Every now and then this blog has mentioned general counsel in relation to Boards of Directors (See my post of Feb. 7, 2006: “general counsel should report to the board of directors”; March 25, 2009: general counsel of McDonald’s sits on the board of directors of Aon Corporation; May 11, 2011: doubts about general counsel serving on another company’s Board; Sept. 5, 2011: four benefits when a general counsel serves on the board of another company; and Nov. 3, 2011: reporting line to the board gives the general counsel more independence.).

The corporate security function under the general counsel of AmerisourceBergen

In the portfolio of John Chou, general counsel and secretary of AmerisourceBergen, fall four groups. The law department includes 21 lawyers and 24 other members. Those 45 are less than half of his total complement because it also includes government affairs, regulatory affairs, and corporate security. All told, the “law department” counts about 110 staff. These demographics emerge from GC Insights: What Multinational General Counsel Value Most (ACC 2012, supplement to ACC Docket) at 12.

The $80 billion pharmaceutical services companies has perhaps the lowest ratio of lawyers per billion I have ever seen for such a huge company. With a quarter of a lawyer per billion, it makes anorexic departments with but a lawyer or two per billion look hefty. That nano-metric deserves some explanation. Might there be a passel of hidden lawyers in the business units? Might outside counsel spending be very high?

My major point, however, has to do with corporate security. That function, I thought, was very unusual to be under the general counsel, although some late-arriving data suggest I am wrong (See my post of March 1, 2012: roughly one-out of three GCs in a survey also ran corporate security.). To my surprise, that post stands alone among the 7,203 published so far as a reference to the corporate security function.

Two unusual responsibilities of Ford’s General Counsel

From GC Insights: What Multinational General Counsel Value Most (ACC 2012, supplement to ACC Docket) at 27, we learn about the law department of Ford Motor. It has 146 lawyers and 215 other staff. Among the 361 total people are Ford’s tax lawyers as well as internal audit.

It is unusual for tax lawyers to be part of the legal department as they more commonly report up to the CFO (See my post of March 27, 2009: tax lawyers and reporting with 7 references.).
http://www.lawdepartmentmanagementblog.com/law_department_management/2009/03/a-breakdown-of-outside-counsel-usage-by-practice-area.html

It is even more unusual, I suspect, for internal audit to report to the general counsel. Although I hold to that belief, four cites on this blog show counter-examples. Perhaps I wrote about them because they seemed exceptions that prove the rule (See my post of March 26, 2005: risk of two-tiered hierarchy; Oct. 8, 2005: Dial Corp.’s GC runs internal audit; Nov. 22, 2008: at Salomon, a “control function”; April 18, 2009: at EMC, internal audit reports to the general counsel; and Feb. 9, 2010: Clorox GC oversees internal audit.).

Over time, the geographic distribution of in-house lawyers will match the sources of revenue of global companies

An item in the ACC Docket, March 2012 at asian briefings 1, notes that the Asian region of Deere & Company’s law department has grown from two to 20 legal department employees in the past five years. The lawyers for that global company are increasingly placed to match the footprint of the company’s revenue. For the very largest companies in the world, the ones that do business all over, their law department locations and numbers of lawyers at them will eventually line up with where they do the most business.

The exception will be the global specialists, such as securities lawyers and corporate governance specialists, as well as the heads of litigation and intellectual property. They may cluster where the preponderance of senior executives sit – but then again as executives disperse global legal specialists too might distribute geographically and the department as a whole will cover the map.