People Drive the Process
February 25, 2010 | Filed Under Crisis Planning, Compliance
You can’t turn on the news without seeing a large Japan-based auto company being pilloried by Congress. (This is the same company that was lionized by certain senators last year). Once a company’s executives are called to Congress, and made to stand with their right hands raised, the court of public opinion already has rendered a verdict.
What is different is that this company has a product development process named after it. Two of the bedrock principles behind this system are “Respect for People” and “Teamwork.”
These are more than bromides, since process is nothing but words on paper; until somebody does something, nothing happens.
In law school you learn how to assemble the facts, marshal applicable law and advocate an outcome. But you likely didn’t learn how to be part of senior-level corporate decision-making so you have a chance at influencing people and shaping outcomes.
Part of the job description for an in-house counsel is to pull back from the demands of all sorts of processes on a good day and spend even 10 minutes considering how the bigger picture is trending for your client. This task is about 100 times harder when you are facing a major crisis or regulatory challenge.
And it is paradoxically even more difficult when you are the GC of a very successful company, because some of your colleagues may believe that all those great processes will themselves ensure good outcomes.
Business Schools Get a B-
March 16, 2009 | Filed Under Managing, Compliance
The New York Times took a close look yesterday at business schools in light of the recent failure of many CEOs and senior executives who sported top-tier MBAs, wondering whether the current curriculum is up to the task.
A welcome bit of candor from one MBA school:
“It is so obvious that something big has failed,” said Ángel Cabrera, dean of the Thunderbird School of Global Management in Glendale, Ariz. “We can look the other way, but come on. The C.E.O.’s of those companies, those are people we used to brag about. We cannot say, ‘Well, it wasn’t our fault’ when there is such a systemic, widespread failure of leadership.”
That’s rather perceptive, since it gets at what the degree is supposed to confer mastery of: administration. Most companies now in the regulatory crosshairs probably needed less administration and more leadership.
You can’t have a debate without traveling down the Charles River:
Jay O. Light, the dean of Harvard Business School, argues that there have been imbalances both on campuses and in the economy. “We lived through an enormous extended period of financial good times, and people became less focused on risks and risk management and more focused on making money,” he said. “We need to move that focus back toward the center.”
I would disagree as most large companies have tremendous resources dedicated to managing risk. But unless the right people are overseeing it, and being hired to run it, all the theoretical risk models aren’t worth much. In addition, some of the smoking craters left by certain financial companies were from instruments designed to control risk that went sideways.
There could be some reason for optimism, although not for the business schools:
Some employers and recruiters also question the value of an M.B.A., and are telling young people they can get better training on the job than in business school. A growing number are setting up programs to help employees develop skills in-house.
That sounds good; perhaps down the road something similar will have to be done to plug the gap left in the training we received in law school.
When the Criminal Becomes a Compliance Leader
May 8, 2008 | Filed Under Criminal Liability, Compliance
The Financial Times management blog notes a different twist on the “do as I say, not as I do” bromide:
Students at Canada’s Richard Ivey School of Business will have an unusual guest speaker on Thursday: Nick Leeson, the rogue trader who served four years in prison after bringing down Barings Bank. Mr. Leeson will aid the students in a case study analysing the bank’s collapse, while giving tips on the safeguards needed to prevent similar debacles. Afterwards, the students will take part in the “Ivey Ring Tradition Ceremony”, in which they pledge “to act ethically and honestly in all their activities”.
The school’s press release touts the benefits of business-barons-to-be of listening to Mr. Leeson:
For future business leaders, it’s important not to just focus on success, but to also hear how people get themselves into trouble. Mr. Leeson will also highlight the importance for all businesses of integrating financial oversight into an enterprise-wide system that supports and promotes ethical behaviour.
Having a criminal lead a compliance case study is one way to teach a lesson; part of the message here could be that crime does pay eventually, as Mr. Leeson gets $15,000 or so for talks such as this.
It’s not clear whether Mr. Leeson will hand out the Ivey Rings; we have obtained closed-circuit camera footage of the ring Mr. Leeson wore around the time of the Barings collapse:
Legal costs over-control?
March 14, 2008 | Filed Under Cost Control, Compliance
Is there an excessive emphasis on the control of legal costs by some in-house departments?
George Terwilliger of Wise & Case wonders and writes about this in the National Law Journal.
Mr. Terwilliger sees a troubling trend in certain cases:
Today, however, the corporate discussion seems to be shifting from “How much does it cost?” or “Can we do it in-house?” to “Can we do without it?”
Two examples given of this potential short-sightedness are avoiding plaintiff IP litigation and potentially cutting corners on FCPA compliance.
These are two clear high-reward, high-risk areas. The legal department can become a revenue center with the right case and effective IP counsel. On the FCPA front, many companies learn the hard way that the global sales bazaar is not always an easy place to navigate.
Mr Terwilliger rightly notes that in-house departments have to have a proper focus on costs, and that the CFO often demands it.
All good so far, but one comment caught my eye:
That said, however, in a very real way, companies tend to get what they pay for when it comes to purchasing legal services. Companies benefit most from legal advice based on specialized training, expertise and judgment gained through long experience.
All true, when talking about a certain team at a specific firm. The challenge for the GC and other managing counsel is to make the right match. Rare are the firms that have the needed expertise that justifies premium rates across all practice areas.
I think I’ve said somewhere before that cost does not equal value. In some cases the services may be overpriced; in Mr. Terwilliger’s case, heading up the white-collar practice group at a major firm can make his hourly rate a relative bargain.
Today’s GC should definitely not skimp when it comes to necessary support from experienced and service-oriented outside counsel.
But given the depth and breadth of outside legal costs, the focus on control is there, it’s increasing, and it ain’t goin’ away. This raises many challenges for law firms that I’ll save for another day.
I must say right here that I see this trend causing enlightened law firms to look hard at what they offer and who they have doing it. They may find in some cases that they are at a fork in the road.
It may closer than some think; sort of a legal off-ramp?
General Counsel Liability
February 18, 2008 | Filed Under GC Liability, Compliance
The Fulton County Daily Report has an excellent summary of the state of GC liability. The list of those involved isn’t large in an absolute sense, but is growing.
According to Roscoe C. Howard Jr. of Troutman Sanders (and a former U.S. Attorney):
“There was a time, quite frankly, when you could be a director or officer and hide behind a corporate shield. Individuals weren’t held to any law enforcement accountability. Now, if you’re CFO, you’re going to jail. They’re going to turn to their GC and say, you need to keep me out of trouble.”
The challenge of course is that neither the GC nor the legal department can be looking over everyone’s shoulder all the time.
But that doesn’t always matter when the authorities come knocking…
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