I am persuaded that law departments that chargeback to operating units the outside fees incurred on their behalf thereby improve client accountability (See my post of Oct. 30, 2005 with its dissenting view; and April 17, 2006 for comments on accounting granularity.). Clients feel the pain; they have a reason to avoid legal mistakes; no longer do their law firm fees get absorbed elsewhere, in some legal budget – and forgotten.
On this basis, a law department should seek to chargeback outside counsel fees incurred even on behalf of staff units, and indeed the corporation as a whole. Complete chargeback, a 100 percent policy, would be difficult for some work, such as enterprise-wide mergers and acquisitions or shareholder derivative suits, but even then some senior executive might be deputized as the responsible client.
Not crazy, that idea. I have heard of a company appointing a czar for some corporate-wide expenses, such as asbestos defense or cleanups of environmental legacy sites. That way, some non-lawyer executive has some degree of accountability. With this system, a law department could chargeback every penny of its external legal fees.