Global Guideposts: Managing International Legal Affairs

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Not too many years ago, general counsel at all but a handful of U.S. companies could focus their work within America's borders. But today, the globalization of business puts many GCs in the complex role of managing legal risk from Beijing to Berlin. That means confronting myriad legal systems and regulatory regimes. GCs of large companies with operations around the globe are faced with supervising in-house lawyers across thousands of miles and multiple time zones. GCs at smaller companies are tasked with finding trustworthy outside counsel in foreign lands. Layer on top of that the vast potential for misunderstanding across diverse languages and cultures.

"The major challenges are the cultural ones," says Dale Matschullat, general counsel of Newell Rubbermaid, which has grown from a North American-centered company to a global operation in the past 15 years. "There are differences between the way Americans perceive legal risk and the way Europeans and Asians do."

On the following pages, present and former in-house legal department leaders share what they've learned about five key challenges in running a global legal department: building a structure; hiring and retaining top talent; communicating across time zones and cultures; aligning a far-flung staff around common goals and objectives; and managing outside counsel.

Building Blocks

Historically, most companies with international operations did not have true global legal departments. Instead, overseas business units or divisions hired and managed their own attorneys, who might or might not have a dotted-line reporting relationship to the general counsel at the corporate headquarters.

All that is changing--fast--according to consultants who regularly advise companies on global legal department management.

"We are advising general counsel to take more control over legal affairs globally," says Rich Seleznov, a managing director at Huron Consulting. Seleznov formerly was director of business and technology operations for Exxon's law department. Taking more control means building a structure under which lawyers around the world report to the GC, with dotted-line reporting to their country business head. Seleznov says such a system reduces legal risk and improves delivery of legal services.

"We think the best practice is that all lawyers report to one GC," agrees Dan DiLucchio, a principal at Altman Weil legal consultancy. Depending on the size of the company, local lawyers might report directly to the global general counsel, or they could report to a regional GC--say a GC for Asia-Pacific--who reports to the global general counsel. In either case, one person ultimately has the responsibility for the quality of legal services and risk management worldwide.

But making the transition from a decentralized legal department to one with centralized control isn't easy. Just ask Peter Wexler, chief legal officer of Schneider Electric. Wexler was tasked with developing a structure for managing Schneider's legal affairs and its 90 lawyers, who are in 31 locations in 23 countries.

Wexler inherited a decentralized system where local business heads hired lawyers as they saw fit. From Wexler's perspective, that raised several issues: The hiring often was done without a full understanding of what skills and experience were needed; the new lawyers were not exposed to corporate training and lacked an internal network for sharing advice; there was no way to leverage the legal expertise that existed across business units; there was no system for escalating legal problems to upper management; and there was no way for Wexler to control quality. Beyond that, he concluded the system was not efficient. For example, one business division had an in-house legal staff in Italy, but another division doing business in Italy didn't know that, and hired outside counsel to handle its legal work in the country.

To meet his objectives of managing legal risk globally and getting the most value for the dollar spent, Wexler created three regions: Americas and Europe, Mideast and Africa, and Asia-Pacific, each with a regional CLO who reports to Wexler.

For Schneider's lawyers, this represents a dramatic change, and Wexler is now coping with building a team out of a legal staff used to working independently. Seleznov says that resistance to changing lawyers' traditional reporting relationships is common.

"Local lawyers [overseas] like working for the local [business] manager," he says. "They see the guy at headquarters in Chicago as meddling in their business."

But Wexler believes the benefits far outweigh the drawbacks. "This was the best solution because it allows one person to control where the resources are going. It eliminates the haves versus the have-nots," Wexler says. It also provides for a global look at where legal support is needed. "For example, the business people in China may want to let lawyers go if their business declines, but this could have an adverse affect on the U.S. business, which needs IP enforcement in China," he adds.

Variations on this structure work for other companies. For example, a general counsel might appoint a strong deputy GC and base that person in a part of the world where the company has extensive legal needs--in Singapore or London, for example, as opposed to in the U.S. That can help break down the inevitable "us versus them" mentality that often develops when people in overseas offices perceive all power to be concentrated in the U.S. headquarters, Seleznov says.

DiLucchio points out that in some large conglomerates, consistency of legal position may not be as important as it is in companies with a single line of business. In conglomerates, lawyers reporting through the business unit might make sense. But a general counsel can still establish a dialog with the lawyers to stay on top of legal issues, DiLucchio says. The GC might also participate in evaluations of the legal staff to help establish consistency of performance across borders. "This is more about a GC exerting his personal influence than solid-line reporting authority," he says.

Staffing Solutions

The ideal hire for an overseas legal assignment has a deep understanding of both the local legal, regulatory and cultural environment and the demands U.S. law puts on corporations. He or she is not only a top-notch lawyer, but also works well with business people. At the same time, this lawyer recognizes that the client is the corporation, not the local executives. Fluent in both the local language and English, this person has the confidence to work independently and the teamwork skills to be part of a bigger network.

Such a person is rare. And companies have varying approaches to finding the right hires for global assignments.

One solution is expatriate American lawyers. But it is a costly option. Ex-pats usually get two times the basic salary they would receive in a comparable U.S. job, plus other compensation such as school tuition for their children and tax equalization payments, according to Kenneth Bunge, an adjunct consultant at Altman Weil. Bunge formerly was managing lawyer at United Technologies Corp. (UTC), responsible for staffing and career development for global legal functions.

Beyond the cost factor, cultural barriers can impede an ex-pat lawyer's effectiveness. "I've seen a U.S. ex-pat lawyer go into an acquired company in Asia and not be accepted by management--he is viewed as an outsider coming in," Bunge says.

But hiring a local lawyer also can create complications, particularly in countries where business practices don't always meet the ethical standards required of U.S. companies.

"You need in-house lawyers who understand the ramifications of unethical behavior and who can stand up to local management when they need to," Bunge adds.

Fortunately, the rise of global legal education is providing some alternatives. UTC recruited lawyers who had come from across the globe to attend the New York University and Columbia University law schools' LLM programs.

UTC first brought them in to work at the U.S. headquarters and then placed them in the international operation. "The difference in hiring local lawyers [without U.S. training] was tremendous," Bunge says.

Working at headquarters, the lawyers learned about the company structure and ethics. They also developed relationships with high-level lawyers.

"They could use their in-house relationships to do their job [overseas] more effectively," he says. "It was not uncommon for a lawyer in Sao Paulo who had spent a year in U.S. headquarters to call the head antitrust lawyer and say, 'I need some help with that.'"

Target Corp. used a similar approach when it established its first overseas legal office in India in 2005. The first step was hiring an Indian attorney with experience working for multinational companies to lead the team.

"It was important to find someone who was used to communicating with U.S. companies in the style and form we are used to," says Jeffrey Proulx, Target's senior counsel for general business.

To build the team, Target recruited people with Indian law degrees who were working on graduate-level U.S. law degrees to participate in a 90-day or more internship at Target headquarters. Those who were successful were offered a job in Bangalore.

"It was a great way to explain what Target is all about by having them in Minneapolis," Proulx says. "And it was a great way for the lawyers here to get used to working with lawyers from other places." To help bridge the cultural gap, the Indian lawyers shared their holidays, traditions and food with the U.S. legal team and held classes in basic Hindi.

Richard Goetz, a member at Dykema Gossett, was formerly associate general counsel for international operations at Ford Motor Co. He points out that once a company has found and trained effective lawyers for its overseas offices, it's important to retain them. That means generating new challenges to keep them engaged.

"A one-person or two-person legal office does not have a lot of career opportunities, unless they make you president," Goetz notes. He suggests assigning lawyers in local offices to be regional experts in areas such as antitrust, broadening their opportunities for interesting work.

Goetz also recommends a six-week program the Center for American and International Law offers to help lawyers trained in other countries get up to speed on U.S. law.

"It's an excellent tool for developing people," he says. "For someone who is junior, it is recognition of their talents."

One downside--the lawyers who went through the training became so valuable that other companies tried to lure them away. To protect its investment, Ford required those who left the company within two years to pay back the company for the cost of the training.

Communication Channels

The complexities of communicating with staff members halfway around the globe hit home for Target Corp. Senior Counsel Jeffrey Proulx when he was conducting a performance review by phone with one of the company's seven India-based legal professionals. It was more difficult than an in-person review at headquarters.

"The challenges come with not having as much face-to-face time," he says. "I was able to share a message, but I was unable to communicate the smile that went with the words."

When it comes to ranking the challenges of managing a global legal department, communication is right up there at the top. Yet it also is the key to management success.

"Communication is absolutely the key element," says Richard Goetz, the former associate general counsel for international operations at Ford and now a member at Dykema Gossett. Goetz points out that because lawyers abroad interact daily with the business people in their own country, it is crucial to develop a relationship and a comfort level so they will escalate problems to you.

"They need to know you are part of their corporate pack, that you shape the function of their legal responsibilities," he says. "It's a difficult process."

Even though 21st-century technologies ease the strain, they can't totally overcome the hindrance of time zones, the potential for misinterpretation and the barriers created by cultural and language differences.

"It's very hard to manage communications," says Dale Matschullat, general counsel of Newell Rubbermaid, which has four lawyers based outside the U.S. "Asia-Pacific is always on the edge of your day and Europe has a narrow window. And so many things get lost in translation. You have to continuously take stock of where you are and whether you are communicating properly because they think about things differently or a word may mean something different to them."

For overcoming these barriers, general counsel try to keep their far-flung staffs connected through technology, starting with e-mail and conference calls. Not surprisingly, Nancy Anderson, who oversees 350 employees in 44 countries as Microsoft's deputy GC of worldwide sales, likes to experiment with company technologies such as Live Meetings. The tool allows participants to interact and collaborate through their desktops. She also utilizes Webcasts, which allow offices in some time zones to join live while others access the meeting later. Proulx favors video conferences--where smiles and gestures can aid communication--and instant messaging, "a good way to have a real-time conversation." He also schedules regular status calls, realizing that keeping in touch is more difficult with lawyers in India than it is with those who are down the hall.

Still, even the most tech-savvy GCs agree that nothing replaces personal contact. So legal departments with overseas offices typically bring all their lawyers together at least once a year for a retreat or department-wide meeting. And GCs travel frequently to visit their offices abroad.

"You need to travel and see these people," says Peter Wexler, chief legal officer of Schneider Electric, who oversees lawyers in 23 countries. "You need to understand their business so you need to spend time with the country manager. You need to spend time developing a relationship with their outside counsel. And you need to spend time with local officials who make policy in areas like IP and who enforce the laws. That helps you help your people do their jobs."

Beyond communicating from headquarters to the overseas offices, GCs need to facilitate communication in the other direction. Dan DiLucchio, a principal at Altman Weil, suggests establishing communication guidelines.

"It's important for the GC to know what is going on," he says. A best practice is to establish legal reporting guidelines based on the concept of "no surprises" on issues with corporate implications, such as a large financial exposure, or a situation with ethical implications, he adds.

DiLucchio suggests that GCs encourage communications between offices in various regions as well.

"In terms of communications, there are lawyers in Asia and Europe who are interested in sharing things," he says. "GCs can set up clear communications channels so lawyers have the ability to share resources [across regions]."

One thing a GC will experience once his department goes global is a longer work day. With a 10-and-a-half hour time difference between Bangalore and Minneapolis, Proulx has had to adjust his schedule accordingly.

"Adding an Indian legal office has changed my life a little bit," he says. "I come in earlier, and I have many more morning meetings."

Alignment Advice

Even with a carefully built structure and multiple communication channels, aligning attorneys dispersed throughout the world around common goals and objectives requires a special effort.

"How do you get so many people on the same page?" asks Peter Wexler, chief legal officer of Schneider Electric. "That's the real crux of the issue, and I'm still trying to figure it out."

It's an issue with no quick fix, but Wexler, who recently brought a decentralized legal team under his control, has some good ideas.

"It starts with understanding the team you have and what you need to accomplish," he says. "How are you going to accomplish it with the team you have?"

To jumpstart the process of getting everyone invested in the corporate goal of a streamlined operation, Wexler issued a challenge to the entire global legal team: Figure out how to save the company $5,000 or find a new and innovative way to do something.

Wexler says the next step is training on corporate standards, so everyone knows what the company expects. Then it's a matter of developing a plan with specific goals; communicating that plan; setting clear expectations; providing team members with needed resources, training and support; and measuring their accomplishments against the expectations.

Nancy Anderson, deputy general counsel of the worldwide sales group at Microsoft, believes it is important not only to assure that all team members are aligned around the same priorities, but also that they are empowered to tailor the implementation of those priorities to their local context.

For Microsoft, the process starts with a three-day summit in May bringing together all 1,000 people in the legal and corporate affairs department from around the globe. This is the launch point for corporate strategies for the next fiscal year, which starts July 1. While the corporate team provides guidance and best practices, the idea is for the local teams to develop implementation plans that will be effective in their locality.

For example, one corporate IP strategy is to reduce piracy. "What will be effective in achieving that goal is quite diverse," Anderson says. In Italy, the Microsoft legal team built an IP enforcement alliance with financial authorities, who are concerned about the effect on sales tax revenues if people are stealing software rather than buying it. In Japan, the focus is on working with enterprise customers to help them manage their software.

But Anderson acknowledges that such local initiatives are hard to achieve.

"We are pretty clear on strategies," Anderson says. "The challenge is how to have people feel empowered to meet the objectives. There is a tendency to feel headquarters dictates things. People feel they will be second-guessed."

Another challenge is the "not invented here" syndrome, according to Anderson. She encourages sharing best practices but finds people are much more excited about sharing their solutions than in adopting someone else's. "People tend to be skeptical," she says. To try to overcome that, Anderson developed a system of rewards to recognize great ideas, always communicated with an explanation of the business achievement.

Rich Seleznov, a managing director at Huron Consulting who formerly directed technology operations for Exxon's global legal department, says the problems of alignment can be acute when global legal offices are first established. When lawyers have been used to working independently, a GC should anticipate resistance to adopting common legal department goals and processes and to providing information about legal issues and costs, he says.

"One way to address change management is to use technology," he says. "Typically every legal department will have some system for managing its portfolio of legal work. To the extent that you can create a global platform to permit the rollup of information to the general counsel, that helps the GC create the global legal function."

However, he cautions that lawyers in some countries are very protective of their work product. "They may want to hide behind privacy laws [to avoid sharing information]. I advise GCs to be patient and take small steps at a time," he adds.

Despite the frustrations, Target Corp. Senior Counsel Jeffrey Proulx says meeting the challenge of getting everyone in his India office on the same page as corporate has had an unexpected benefit: It has helped him manage his legal team at home more effectively, too.

"Doing work with the team remotely has improved my ability to work domestically," he says. "The experience forces you to think about processes and develop playbooks and templates and common methodologies. It has made the department stronger by making us write things down."


Counsel Concerns

For general counsel in small legal departments tasked with managing risk for their company's global operations, finding outstanding outside counsel to handle legal matters abroad is a daunting task.

"It's a nonstop challenge," says Peter Bragdon, general counsel of Columbia Sportswear Co. Bragdon's department consists of four attorneys, three located at corporate headquarters in Portland, Ore., and one in Geneva, Switzerland, but the company's operations extend to 75 countries. So he is heavily dependent on outside counsel.

Bragdon looks for long-term relationships so his firms will invest in learning his business. "I want my lawyers to spend time in a factory and spend time in customer service to see how it works. But turnover in law firms is a real challenge."

Global law firms offer efficiency--a single source for getting answers to legal questions from around the world--though not necessarily the lowest price. Bragdon likes to shop around when he has the time, but he's not convinced that is always effective. "To get 10 percent off from a firm that will take 25 percent longer to do things and that probably will miss things because it doesn't understand our business--it's not worth the time."

In hiring firms overseas, Bragdon says a major concern is finding lawyers who understand how laws in their country intersect with U.S. laws.

"I can find great lawyers from Canada to Sri Lanka, but it is tougher to find lawyers who understand how all of our obligations intersect," he says. "One can get the absolutely correct legal answer in one jurisdiction and find that it contradicts with the law in another jurisdiction."

Brad Thies, general counsel of FEI, a Hillsboro, Ore.-based electron microscope company, says that U.S. firms often lack the global expertise he seeks.

"Some of the U.S. firms don't get it," he says. "They don't understand the global presence they need to serve a company like ours."

Senior Editor

Mary Swanton

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