For the inside counsel revolution to succeed, the General Counsel must follow a basic dictum: Hire the best. The key to the legal function’s credibility with the CEO and senior line executives is to seek broad-gauge lawyers who are outstanding technical experts, wise counselors and effective leaders to occupy the top specialist jobs in the company and to be general counsel in the main operating divisions. Placing the best people in senior lawyer positions across the company also has great ripple effects, as these individuals, in turn, build their specialty or business legal groups through other outstanding hires.
Top business leaders will say that they spend a significant portion of their time – up to 40% – on hiring, compensating, promoting and retaining people in top jobs. That absolutely must be the case for the General Counsel, and his or her senior peers, in a large, complex company.
The spec
One can make an endless list of the attributes a GC should seek in their senior lawyers. In my nearly 20 years of hiring great people, one attribute was common to all applicants: they had to be outstanding technical lawyers – absolutely at the top of the profession with up-to-date knowledge, tremendous analytic ability and the judgment to get to the guts of a matter. This was of course true when they were being hired as specialists – as head of corporate tax or litigation or environment or trade or labor/employment or IP or M&A. But it was also true for individuals who would be general counsels of an operating division. If that division was highly regulated, I was disposed to an outstanding litigator; if it was primarily commercial, I had a preference for an outstanding deal/business lawyer. These preferences were always trumped by unalloyed quality and by a sterling professional reputation as a great technical lawyer.
But on the roles of wise counselor and accountable leader, I also was looking for people who had ‘complementary competencies’ beyond ‘core legal competencies’, which are essential to multi-dimensional counseling and leadership. The General Counsel, and inside lawyers, must, for example, be skilled in asking ‘what ought to be’ questions; in articulating systematic and constructive options that expose and explore the value tensions inherent in most decisions; in having financial, scientific and technological literacy; in assessing risk, but not being paralyzed by its existence; in knowing how to implement effective rules, policies and decisions; in understanding the hurly burly world of politics, media and power outside the corporation; in leading and building organizations; in having understanding, intuition, perspective and respect relating to different cultures around the globe; in, ultimately, having the quintessential quality of the great generalist to envision and understand the multiple dimensions of issues – to define the problem properly – and the ability to comprehensively integrate those dimensions in decision-making.
This search for ‘complementary competencies’ often meant seeking certain kinds of experience for both specialists and generalists: experience in government, in leadership positions, on business issues and in international matters. The reasons for leadership, business and international experience are obvious. But, for me, government experience, if possible, was also important because I believed that working inside government gave people a ‘fingertips’ understanding of broad issues with dimensions far beyond narrow legal questions and a feel for how public sector institutions worked that they couldn’t acquire as easily (although it was not impossible) from representing clients before government – in legislative, regulatory or judicial venues.
As part of the search for people with broad ‘complementary competencies’, I also looked for three key personal characteristics when I was recruiting for the top jobs, and especially when I was interviewing the final candidates. I wanted people who had breadth and creativity. Innovative problem-solving is so important because the beauty of inside lawyering is that it offers endless opportunities to improve the legal function and the corporation, but this requires breadth of knowledge and experience. I wanted people who, in my judgment, had the chemistry to work in a complex business environment, both in relating to leaders and in relating to peers on the inevitable cross-functional teams.
Most of all, I wanted people with authenticity and integrity who were, in their souls, concerned about the quest for what was ‘right’. Therefore, I was looking for people who could be partners to the business leaders, but also guardians of the corporation. Although I might use a head-hunter to develop a list of candidates (sometimes, especially in the early years, I just used my own contacts to generate names), I did much of the reference checking for these top hires myself in personal phone calls. I often asked candidates for people who had been on the other side of cases or deals because I wanted to talk to them, too. My interview with the final candidates was to get a feel for the kind of people they were: the resumes were all outstanding and so were the references. But I had to make the personal judgment about motivation, character, integrity and potential chemistry in different corporate settings.
The pitch
At the beginning of my tenure in the late 1980s, I recruited lawyers almost exclusively from law firms and government because the pool of strong inside counsel was not as broad and deep as it would become by the late 90s and the beginning of this century. The case I made to highly talented ‘outside’ lawyers for becoming senior lawyers ‘inside’ the corporation remained consistent during my time as GC. They would become enmeshed in the fascinating world of global business. They would be part of top business teams, working on business problems. They would join a high quality, collegial legal partnership. They wouldn’t have to worry about getting business, generating revenue and filling in time sheets. They would learn more than they could imagine about leadership, business, the world. They could, in important ways, define priority issues for their organization, rather than having their work load dictated by client preferences. They would have significant independence from me. But, they would work as hard or harder than they had in their prior jobs because there are an infinite number of initiatives one can take to improve a huge global corporation. (None of my Type A hires ever thought an ‘inside’ job was easier than one ‘outside’, and they were right, of course.) This pitch worked virtually every time as the inside counsel movement gained momentum in the early 90s.
The argument to lawyers who were outside corporations began to have even more purchase as more and more corporations decided to upgrade their legal teams and as more and more lawyers joined those teams from the outside. People began to realize that becoming a senior inside counsel significantly broadened career opportunities. I always told people, ‘give me three or four years in place’, but soon enough the ‘head-hunters will come calling’ and I would be fine if they then wanted to move on. Specialists could build path-breaking units and be even more prominent in their fields, not just for nationally recognized legal expertise, but for their knowledge and skill in translating that expertise into a highly complex business setting.
The money
In ‘hiring the best’, a recurring question is whether the corporation can match, or come close to, compensation for successful law firm partners. This question also applies to senior government officials who, as they leave their jobs, will likely have a choice between law firms and corporations. And it will surely apply to outstanding lawyers already employed by other corporations who may have substantial deferred compensation (in equity or cash grants) that vests in the future. I always told candidates that they should join the company for the challenge, not for the money. But I also said that they had a chance to develop more net worth in the company than in a firm.
The financial proposition was straightforward. We would try to match law firm draw with cash: a combination of salary and bonus (with the bonus guaranteed in the first year). Both salary and bonus would rise annually, assuming good individual performance and good company (or business unit) performance.
An incoming senior lawyer would also receive a significant piece of equity, either in stock options or restricted stock units, and again assuming good performance, the lawyer could expect an annual equity grant too. Senior lawyers could also participate in longer-term incentive programs based on three or more years of sustained company performance. This package had obvious risks. One law firm partner, having agreed to join GE, called to say he had forgotten to ask me one question: ‘How long is my contract?’ My response: ‘One day’. At this level, at least at GE, we were all ‘at-will’ employees. We were making a personal bet on our skills and a financial bet on the company.
Not all global corporations, even major ones, will want to ‘meet market’ for senior lawyers in the way I have described – or be able to do so. In fact, this issue may be more fraught today than it was in yesteryear. In an attempt to keep revenue producers and participate in the ‘free agency’ market, law firms, of course, have focused on increasing profits per ‘equity’ partner. ‘Stars’ in the 35-55-year-old range (a target area for senior inside counsel) can obviously be expensive, with annual profits per equity partner in the top firms exceeding $2 million. Outstanding inside counsel at other companies will be well aware of the different elements of a corporate compensation package and can also pose difficult ‘meet the market’ issues. Indeed, there is evidence that there is increasing competition for outstanding lawyers who are already serving inside companies.
To deal with these pressures to ‘meet market’, whether law firm pay or seasoned inside counsel compensation, corporations may ask candidates to take less in annual cash remuneration (not meet the annual law firm draw) and take more risk on future equity appreciation. But these compensation packages for senior lawyers must be structured by boards of directors to reward integrity and severely penalize its absence through ‘hold-backs’ or ‘claw-backs’ and other compensation recovery policies. I deeply believe that outside legal costs, and overall legal spend, can be reduced by enormously creative and productive lawyers inside the company. For the right lawyer, meeting market is a smart economic as well as legal move.
The CEO
The support of the CEO was the key to any success I may have had in meeting market and hiring great lawyers. Both Jack Welch and Jeff Immelt understood the value of top talent, and the need to open the doors and windows of the company to people who had a breadth of experience. Indeed, with Welch’s blessing, the legal area was one of the first at GE to look systematically outside the company for lateral talent. When sending a candidate forward to the CEO, I personally wrote an extended justification, attaching both the bio and my summary of reference checks. I sought to explain my vision of the job and why the candidate was the right fit.
A vital aspect of CEO support for hiring the best is the example of the willingness of Welch and Immelt to interview candidates for the top 40-50 legal positions in the company (the top specialists, their deputies, division GCs and, at times, key lawyers in those divisions). The CEOs wanted to judge for themselves what kind of person these candidates were. Both Welch and Immelt had a lot of confidence in their ability to appraise people, whatever the job. Once they had completed the interview and if they liked the candidate, then the compensation issues were almost always resolved with relative ease even if the market price was high. Indeed, if the CEO was convinced, then he could be creative in order to bring someone aboard.
A great advantage of these initial CEO interviews is that, because they had personally been involved in the hire, the CEO felt comfortable having direct personal relationships with my direct line or strong dotted line reports. These relationships often led to real mutual respect and admiration. To me, that was great. It expanded enormously the reach and influence of the legal organization.
Promoting from within
When I became GC in 1987, I had 33 direct-line or strong dotted-line reports. I replaced 30 of these with lawyers from outside GE within my first three-plus years. At my first and last ‘all lawyers’ meeting (we became too big), I announced a simple principle about personnel: ‘We will look inside and we will look outside, and we will hire the best’. Until then, if GE lawyers stayed long enough, they had slowly migrated up the organization chart by virtue of seniority because there was no lateral hiring for top positions. Not any longer. Until there was a critical mass of people I had hired, my ‘hire the best’ speech caused significant discontent in some corners of the legal organization among GE veterans. To ameliorate this problem, when I let people go and when they were not of retirement age, I tried to place them as ‘of counsel’ in our law firms and give the firm some business. I tried to give them as dignified an exit as possible. I didn’t want unnecessarily to create animosity among their friends who remained. But exit it would be. I had learned from my prior mentors in large organizations that you had to move fast to put your people in place. Despite my seeking a soft landing for senior lawyers who were leaving, I was resented within a legal organization that, when I started, numbered about 500 people who felt blocked from top jobs. And, for the most part, they were.
But promoting from within is obviously important for morale, if quality standards are maintained. So, another advantage of hiring superb senior lawyers is that they, in turn, could hire other superb younger lawyers into their organizations. My senior lawyers used roughly the same pitch I made about the advantages of working inside a company, and together they created a whole new pool of superior but more junior lawyers in the company. When the first generation of my senior hires moved up in GE or outside to major jobs, I was then able in many cases to promote the next level of new inside lawyers to those senior posts because the senior lawyers had remade their legal organizations. But not always. I tried never to lose my ‘hire the best’ ethos for every position. And, although we had the usual corporate ‘succession planning’ chart for annual HR reviews, I didn’t follow it in a rote manner because filing a major legal job depended greatly on the circumstances facing the function or the business. Still, in later years, we could more often (but not always) promote from within.
Public company lawyers?
It is great that, with the inside counsel revolution, there are now many excellent lawyers working inside corporations. But I do not believe that CEOs, HR departments and head-hunters should focus solely on ‘public company lawyers’ when trying to fill senior positions. Over the years, I have had innumerable calls from head-hunters or corporate HR departments looking for talent. Increasingly, they say the search is limited to people currently in corporate legal departments. That is a mistake. Hire the best!