What Makes an Ethical Executive?

October 16, 2007 | Filed Under Compliance, In the News 

A trip to Shenandoah National Park in Virginia last week found me offline and unplugged for a period of time. Reading material was scarce, but I was able to secure a daily copy of USA Today by befriending the helpful staffer at the lodge front desk.

One article in McPaper caught my eye: a report about the background of former Enron “executive” Lynn Brewer. Ms. Brewer wrote a book, “Confessions of an Enron Executive: A Whistleblower’s Story,” which launched a career as a business speaker and advisor.

But according to the newspaper, Ms. Brewer’s executive status may not be as it seems; quoting two of her former supervisors, Mary Solmonson and David Gossett:

But her boss, Solmonson, says Brewer had no control over budget or salaries and that she herself, as a senior director, would not be considered an executive. Further, Brewer’s work had nothing to do with management. “What my group did was very much a clerical function,” says Solmonson, “an important clerical function, but it was clerical.”

Gossett, Brewer’s boss during her last months at the company, scoffs at the notion that she was an executive. He was a director at Enron, he says, and that didn’t qualify him as an executive. “There was no way she was an executive, not even with a little ‘e,’ ” he adds. “If she was an executive, she was in charge of nothing.”

The article also describes the circumstances of Ms. Brewer’s departure and weighs her claims of whistleblower status.

Senior corporate executives serious about compliance learn that people sometimes hear what you say, but they really watch what you do. They also learn that leadership is called for when dealing with two key management issues: responsibility and credit.

Responsibility is something you take.

Credit is something you give.

The GC: Going Up? (or Down!)

October 4, 2007 | Filed Under GC Liability, GC as CEO Springboard 

It’s like living in an elevator.

Two recent articles in the ALM universe show the highs and lows of the GC life.

The first discusses whether the GC position could be a road to the top. Writer Katheryn Hayes Tucker quotes former executive recruiter Frederick W. Wackerle, who is not sold on the idea yet, but sees a glimmer of logic:

To be sure, Wackerle considers a law degree to be valuable, particularly when combined with an MBA. But he advises not spending a long time in a law firm or an in-house job on the way to the top. “Reporting to the CEO as general counsel for 20 years, it’s very unlikely that they would be a candidate for CEO succession,” he said, “unless they’re involved in working with strategy.”

This is the same attitude that the Wall Street Journal adopted earlier this year.

But just as the GC community starts to see more options for upward mobility, reality intrudes and reminds of the very serious nature of the position. The second article in question lists the GCs charged with civil or criminal wrongdoing. To be fair, the problems at nearly all these companies extended way beyond the GC.

Given the challenging matters dealt with by today’s GC, they get much more contact with CEOs, boards, and the investor community. Maybe that’s why boards are increasingly open to consider a lawyer for CEO.

Just as long as they pick carefully.

Return on Legal Resources

October 2, 2007 | Filed Under Legal Resources, Managing 

The law department as profit center?

Bloomberg reports that this group at DuPont was responsible for $290 million in revenue last year,which included a $92 million asbestos insurance settlement.

According to the article:

The asbestos agreement in December 2006 resulted from a three-year-old DuPont program to find ways to generate revenue by filing lawsuits the company would not otherwise have initiated or by seeking licenses from companies using its patents. The law department has brought in $630 million since 2004, according to DuPont assistant general counsel Thomas Sager.

Dupont is integrating alternative fee arrangements into cost recovery activities:

The firms that handled last year’s insurance settlement, Pittsburgh-based Kirkpatrick & Lockhart Preston Gates Ellis and Beaumont, Texas-based MehaffyWeber, reduced or waived their hourly rates and shared about $15 million of the settlement.

Big settlements can skew results a bit, but it’s an important discipline for a law department. It’s perhaps an even more important signal to send to the CEO and the board.