Changing Demands Have In-House Counsel Gaining Over Outside Firms, GCs Say
Chief legal officers are responding to corporate demands to cut legal costs by boosting in-house capabilities, often at the expense of their outside counsel, said a panel of chief legal officers at Foley & Lardner’s Chicago offices.
Given the higher regulatory risks (and the velocity of those risks, thanks to the Internet), companies can’t afford to react to crises in reasoned, drawn-out time frames, said Janet G. Kelley, senior vice president and general counsel of Meijer Inc. Kelley was among those participating in a discussion last week that was part of Foley’s National Directors Institute Web Conference Series.
“Especially for companies with reputation issues, there is a need for immediacy,” Kelley said. “You don’t have time to write the perfect memo; executives want to know now.”
These factors have been catalysts to the evolving role of GCs from supporting actors to more involved, integral and functional C-suite members. Today’s GCs are key strategists who counsel senior executives on business objectives and play integral roles at board meetings and C-suite discussions, the panel said.
“Executive committees realize the value of having a GC at the table and the value of being able to protect a company’s interests early on,” said Deborah Dorman-Rodriguez, senior vice president and chief legal officer of Health Care Service Corp. She added that getting a legal perspective early on saves money.
The pressure to reduce costs has also pushed general counsel to become more assertive when voicing billing and staffing concerns to their outside lawyers.
“The hourly rate may be an outdated approach for us and not sustainable,” said Dorman-Rodriguez, who cut HCSC’s outside counsel from 120 to 25 firms more than a year ago. “We’re also actively engaged on how legal matters are staffed, and if one is a little too top-heavy, we’ll say we have a problem with the budget.”
For Meijer’s Kelley, individual line items and hourly billing aren’t the biggest issues when reducing legal costs. She considers who is handling the entire matter, and said the best team for the job may be an expanded in-house staff or even nonlawyers.
“Sometimes you don’t need a paralegal or lawyer to do certain things, as long as there is proper supervision,” Kelley said.
“We are going to continue to see more in-house counsel,” said Kelley, who cited a recent survey by the Association of Corporate Counsel that said 29 percent of respondents plan to hire in their departments this year. “It’s one of the best ways to manage costs.”
Todd Hartman, Best Buy general counsel and vice president, added that the stream of layoffs at large law firms has created ripe picking grounds for general counsel looking to expand their in-house departments.