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Sunday, Jun 4, 2023

General Counsels Grow Roles to the Strategic

Glaukos Corp. (NYSE: GKOS) General Counsel Robert Davis, besides handling strictly legal matters for the San Clemente-based medical device maker, also manages units overseeing product medical safety and quality affairs.

“I’m starting to take on more operational roles,” he said, indicating he’s also expanded into corporate governance and institutional shareholder relations.

“I’ve really enjoyed that, having that direct line of communication with our investors. To hear directly from our investors of what’s on their minds is so valuable. It gives us a stronger voice in the boardroom.”

Corporate and outside attorneys who work for corporations say that due to increased regulation, they’re being called to identify landmines before they can become more damaging and costly. They made it clear that they’re taking on more work that historically hasn’t been in their job descriptions.

Angela Grinstead, deputy general counsel at Irvine-based analytics and data provider CoreLogic Inc. (NYSE: CLGX), said her role has broadened to take on issues such as corporate governance and risk management.

“Here at CoreLogic, we’re seeing a focus on in-house lawyers being more part of the business and thinking about things strategically,” she said. “Lawyers are becoming part of the business strategy.”

Robert Sjogren, general counsel at Irvine-based bank First Foundation Inc. (Nasdaq: FFWM), said he often attends meetings in various company departments to identify products in development that might pose unacceptable problems.

“We’re providing the legal and risk perspectives in many different disciplines,” he said. “For me, it’s fantastic. It keeps me engaged.”

Hot Issues

The most pressing needs for corporations today are for attorneys who can handle California’s ever-changing employment laws, Sjogren said.

“That’s where employers are spending money.”

The #MeToo movement has energized some employees to file complaints regarding sexual harassment or unfair pay. Besides responding to the complaints, companies have instituted more preventative training, said Keith Carlson, a partner in Newport Beach-based law firm Carlson & Jayakumar LLP, which specializes in healthcare and employment regulations.

“There is a noticeable increase in … sexual harassment complaints,” Carlson said.

Another hot area for outside legal work locally is managing privacy laws recently enacted in California and in Europe.

“In general, we’re seeing an increase in inquiries regarding data privacy and security and an increasing awareness regarding these issues in general,” said Bernadette M. Chala, chief legal officer and general counsel at Irvine-based beauty products maker and distributor Arbonne International LLC.

“People are asking about this because they have more awareness from the general news media that it can be an issue,” Chala said by email.

Legal Bonuses

Controlling outside legal costs is also high on the to-do list, local lawyers said.

Bruce Fischer, co-managing shareholder at the Irvine office of Greenberg Traurig LLP, has heard about trends from GC colleagues. “The overwhelming response was a greater emphasis on cost controls.”

The subject is more complicated than at first glance. It would seem intuitive that costs would fall because of an increasing use of technology in the place of outside legal work, along with a glut of attorneys. “There are too many lawyers in many law firms,” said a 2018 report by legal consulting firm Altman Weil, which surveyed 801 firms with at least 50 lawyers.

But none of the general counsels or outside contractors the Business Journal interviewed said they’re observing a widespread decrease in fees. For one thing, they said the strong economy is causing increased demand.

“Rates are going up, as well,” Fischer said. “It’s happening even more now.”

Corporations are striving to develop alternative arrangements to control costs, such as detailed outside counsel budgets upfront or prior approvals for going over-budget, Fischer said.

CoreLogic is minimizing the number of vendors it hires in general, including law firms.

“There’s less a focus on an hourly rate and more a focus on the efficiency that you’ll get from your outside counsel,” said Grinstead at CoreLogic. “We’re focusing more on the package of what we’ll get.”

Glaukos’ Davis said that while fees are “trending upwards slightly,” his company is trying to offset them by paying “success fees,” such as bonuses for certain outcomes.

“We’re pushing for that, and we’re getting it,” he said. “We’re trying to align them with how we get compensated, performance based.”

Arbonne’s Chala said her company is working with high-caliber law firms “to make sure costs are trending down and that we are using IT solutions to make smarter, more efficient legal solutions, which also happen to be cheaper.”

The IT Answer

Technology can be a help and a challenge in corporate legal offices.

“Technology is now front and center in our lives, personally and professionally,” said Aimee Weisner, general counsel and corporate vice president at Irvine-based heart valve maker Edwards Lifesciences Corp. (NYSE: EW), the biggest publicly traded company based in Orange County.

“Whether it’s privacy, cybersecurity, legal technology platforms, big data or social media, legal departments are learning and adapting on a daily basis,” Weisner wrote in an email. “The challenge is to stay current and to guide our organizations in such an uncertain time. This requires agility and solid judgment. It is also an opportunity to shine.”

Technology’s importance is growing in areas such as discovery, due diligence and leases.

“A lot of law firms are partnering with technology companies or are implementing some form of artificial intelligence,” Grinstead said. “We’re not seeing rates going down, but I do see overall transaction costs staying flat with the implementation of technology.”

While corporations want to use artificial intelligence to keep research costs down, it’s not yet an industry disruptor ala Uber.

“We’re reading about AI doing legal research, but we’re not seeing it,” Carlson said. “We’re still at a point where clients want an associate to do research.”

But AI is making inroads in areas including real estate leases, Fischer at Greenberg Traurig said.

“It works for certain things. The majority consensus is that it’s a helpful tool, but we’re not comfortable relying on it yet. Going forward, that process will get better.”

Strategic Advice

Many GCs said they’re interested in how fellow GCs spend their days. First Foundation’s Sjogren is focused on efficiency, which he said is a major concern because he doesn’t have a staff at the bank, which has almost 500 employees.

“You don’t have a body who can do everything,” he said. “You have to be efficient in identifying the important issues with a broad scope.”

It’s not just general counsels whose roles are expanding. So are those of outside legal firms, which are now also hired to provide strategic advice on a company’s direction rather than just on litigation and contractual matters, Fischer said.

“They’re looking for a trusted adviser, which is becoming more and more important. Fees again seem to be going up. Clients continue to be disappointed because of the failure of some of their counsels to act as advisers and give them recommendations. I keep hearing that over and over again.”

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.

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