You have secured the top job as general counsel for a global corporate. Time for celebration? Well, yes - but for most, the work has just begun. Effective management of a global legal function is one of the greatest challenges facing in-house lawyers in the new millennium.
As business moves onto the international stage with ever greater cross-border merger and acquisition activity, it is a constant challenge for corporate counsel to keep up with a company's changing direction. Senior in-house lawyers are charged with the daunting task of putting in place a legal function that can give effective and timely advice across a multitude of jurisdictions.
Keeping a handle on constantly changing regulatory and compliance issues in each jurisdiction can be a major headache. Add to this the logistical nightmare of managing lawyers stretched out across a number of jurisdictions, the relationship of those lawyers with the business units and a plethora of local external advisers and you have a potentially lethal mix.
At the Martindale-Hubbell Counsel to Counsel forum in Brussels, top European in-house lawyers gathered to discuss best practices across borders. A straw poll taken at the beginning of the session revealed that most of the participants spent more than half of their time on issues that are cross-border in nature. While common themes emerged from the forum, strategies for managing these issues were diverse.
One of the main issues for the delegates was whether to centralise or decentralise the function. Is it better to bring all lawyers together in one group or split the function across the business? A centralised team provides a tight unit that can be easily managed by the head of legal, but how close can it really get to what the business wants? If lawyers are not sitting in the countries of operation how can they understand the business needs and how can the head of legal ensure that they have a handle on all potential problems?
On the other hand, a decentralised structure can lead to lawyers working by themselves or in small teams in each jurisdiction getting too close to the business and losing their objectivity. Decentralisation can also militate against a structured career path for lawyers working far away from the central team.
Cisco Systems has, over the past three years, moved from a centralised legal function to a decentralised team. The computer networking giant with an annual turnover of $22bn (£15.7bn), has a legal regulatory team of 110 people, 60 of which are lawyers and a third of which are based abroad.
"We think that this is the best way to deal with the sales force and to understand the issues they face," said Joanna Bissada-Bloch, co-chair of the forum and managing attorney for Europe South.
"But it means that there is one lawyer in a building with maybe 600 people, so we have to develop strong means of communication in the team." She added that it is essential to make sure that in-house lawyers do not feel isolated and Cisco has implemented training, teamwork tools and activities to ensure that there is a sense of belonging to the legal function and a unified approach to issues that are thrown up in each jurisdiction.
"For me it has improved the work of the team," Bissada-Bloch said. "As far as career development is concerned it is a question of how the company sees it. You do not need to be at the headquarters to be the boss."
But the benefits of lawyers working close to the business units need to be carefully monitored. How often, for instance, do the lawyers meet up with the business users?
Joachim Kaffanke, general counsel at chemicals and plastics group Celanese AG, has recently moved from a decentralised function to a centralised function.
"We asked how many face-to-face meetings the lawyers had with the business to gauge how necessary it is for them to be on the ground," he said. "Ultimately we decided to bring the lawyers back into a single unit."
With law firms moving onto the global market, opinions were equally mixed about how to manage external advisers - whether to go for the 'global clearing house' model or instruct one law firm in each jurisdiction.
For Cisco, as the team was decentralised so the group moved from one primary law firm to local advisers in the countries of operation. Again, control is key. All communications with the law firms derive from the local lawyer and the in-house team acts as an effective 'filter' for all instructions. This way the group can monitor the work going out to the firm.
For others the advantages of a single law firm outweighed the disadvantages. "We picked our lawyers locally, but then moved to one international firm," said one delegate. "The ability for one firm to build up knowledge of the company not only of the lawyers, but the key business people has worked very well for us."
For smaller in-house teams and on the larger deals the advantage of a global firm is that it can project manage a deal across each jurisdiction, effectively acting as the in-house department for the client. But clients are paying for this with partners charging the same rate for legal advice and management time.
For many the approach depended on the type of work that was being outsourced. Delegates agreed that for competition and data protection issues that require a group-wide approach a single law firm is the best option.
Even those who favoured local advisers preferred a single international firm for competition and data protection issues - where a unified global approach and consistency in each jurisdiction is essential.
Other areas such as employment and debt collection, which are more important to the local management, can often be sent out to local firms.
The sensibilities of the local business units are an important consideration when looking at how the internal and external legal advice is provided. It is important to bear in mind the views of all interested parties including the managers in the regions who may have built up relationships with local law firms.
The choice of adviser also depends on the law adopted by the company. One dilemma for a global head of legal is whether to apply local law to each contract or adopt a single or joint jurisdiction company-wide, thereby making savings and ensuring a greater consistency of approach across the board. Delegates agreed that this depended largely on the nature of the company - for business-to-business groups a single law is easier to adopt than for consumer groups.
The bad news for the global firms is that a number of the delegates said international firms led to higher costs. And two of the delegates went so far as to say that escalating costs was of such concern that it now influenced the law that the group chose to adopt company-wide.
"One criteria when we decide which law to adopt is where we can get the best value for money for a transaction. I would be very reluctant to go to a UK law firm," said Kaffanke at Celanese. "It is a question of cost and competence. English law is currently much too expensive for us."
While the views of the delegates that gathered for the forum were diverse, the message was clear: in a global market the demands on general counsel are ever greater and the need for external legal advisers to understand and service these demands is ever more critical.
This is a report of the Martindale-Hubbell Counsel to Counsel forum in Brussels on best practices in corporate counselling across borders. Law firm sponsors were Andersen Legal and Heuking Kuhn Luer Wojtek. A full report of the forum will also appear in Legal Week's sister title Legal Director next month.
What keeps you awake at night?
- The risks involved in business: people not understanding that law in companies changes constantly and that contracts have to be reviewed and amended in light of the changes
- Lack of time to do the job properly and with the depth required to respond to the most important issues with the right emphasis
- The business decisions we are unaware of, that may expose the company to serious risk
- The possibility that something may have been missed - that in the rush to review contracts and documents promptly, something may have gone uncorrected
- The risk of missing out on some key aspects of the legal issue, due to lack of thorough information or explanation from the business
- Not being able to deliver a complex project on time or on budget
What is most valued by management?
- Speed of response
- Co-operation between the business, the lawyers, the head office and the local units
- Loyalty to the business - a focus on the business issue as well as the legal implications
- The ability to make recommendations rather than simply provide lots of alternatives
- Quality: the in-house counsel knows how to identify risks in the context of the business and the corporate culture
- Delivery to the milestones and timing agreed to so that business can proceed
- Simplicity: making it easy for them to understand the key legal issues and why they matter
- Advising executive management on upcoming legal issues that could affect the business