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Avoiding the Brain Drain: Do You Have a Succession Plan?

By the year 2010, a large percentage of the workforce will be retiring. Many of these retiring “Baby Boomers” will include General Counsels and other senior-level legal counsels in the majority of the largest corporations in the United States and Canada.

As current lawyers reach retirement age between 2010 and 2015, most companies lack formal succession plans to prepare for the eventual departure of these senior attorneys.

According to a Robert Half Legal Survey, 53% of corporate legal departments said they had no formal succession plan in place for key leaders, only 41% had one, and 6% did not know.

One of the most critical components of business survival for most companies, but yet most often overlooked, is the planning for the internal succession of key leaders, including those in corporate legal departments.

That said, creating and implementing a succession plan takes time, resources, and most companies do not give it the attention it deserves. However, without a formal succession plan, companies may find themselves confronted with a costly brain drain.

Companies may stand to not only lose institutional knowledge and relationships, but also experience a lag in productivity, and bear the added financial costs associated with not having someone readily available to take on a key position.

It may take many years to identify and groom an attorney to advance into a leadership role; therefore, companies should start to invest the time and resources to develop succession plans as soon as possible.

While succession planning is not an exact science, here are some suggestions for corporate legal departments to consider when developing a succession plan:

1. Identify Potential Successors

Starting with a short list, select the attorney(s) who show the most potential and who work(s) well with the organization. Is there a likely candidate or an unlikely candidate missing from the list?

2. Develop a Formal Training & Mentoring Plan

It is important to implement training and mentoring programs for high-potential employees, and include them in strategy discussions relating to the operation of the department. This will provide succession candidates the opportunity to build their skills and leadership abilities in practice management, new business development, marketing, strategic planning, and client service.

3. Establish a Timetable

Orienting an individual into a successor’s role takes time. At minimum, a 12-month window gives both parties the opportunity to transfer knowledge and manage relationships.

4. Plan the Transition

Let employees learn from the person they will be replacing. They should work together on projects, interact at the board of directors meetings, participate in client meetings, and otherwise get involve in the day-to-day activities and responsibilities of the position. Having the successor shadow his or her successee can be one of the most valuable way to impart and retain knowledge.

Skillfully done, succession planning can safeguard legal department from the “brain drain” that the Baby Boomer retirements might cause, as well as the high financial costs of finding a replacement.

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Hiring A General Counsel

The economy, globalization, mergers, compliance concerns and business competition have all influenced the way the general counsel legal function is seen and used. Today, CEOs are looking to their general counsel as both business and legal advisors who must consider all of the issues that a company faces. In addition to being a strategic business partner and a legal advisor, the general counsel must also lead, organize, manage, train, and educate.

The increased complexity of the general counsel role has made filling these vacancies more challenging than ever. Even the most experienced CEOs and human resource professionals can find it difficult to effectively assess candidates and identify the more subtle skills required for this position. Here are five suggestions for companies to consider when hiring a general counsel:

1. Look Inside First

The most effective way to replace a departing general counsel is to elevate a candidate from a company’s existing legal department. Increasingly, general counsels are becoming responsible for creating succession plans, serving as mentors and developing internal talent. These efforts often result in strong internal candidates being available for the general counsel position.

While internal candidates should be a part of every company’s long-term succession planning process, not every company can support this type of activity. This process typically requires that a company already have a general counsel in place, as well as enough internal attorneys with the experience and competencies required to develop as general counsel candidates. In other words, succession planning works best in larger legal departments. Where a company seeks its first general counsel or does not have the bandwidth to grow internal candidates, outside recruiting becomes the obvious method of sourcing general counsel candidates.

2. Prioritize Core Competencies

The greatest barrier to successfully hiring a general counsel comes from improper management of expectations. In general, companies that are looking to hire their first general counsel tend to look for the “perfect” candidate rather than the “right” candidate. While these two categories do not have to be mutually exclusive, the approach used for each can yield very different results. The real problem lies in burdening the “perfect” candidate description with a slate of requirements that are generally unnecessary and unrealistic, rather than identifying and prioritizing core competencies required for the role as they relate specifically to the company.

Most companies would be thrilled to hire the general counsel of a major public company with all of the sophistication and hauteur that someone in this position would bring. However, not only is this exclusive candidate pool extremely small, but also most companies don’t have the wherewithal to recruit these types of candidates. Most importantly, the great majority of companies don’t need a general counsel from this candidate pool. The biggest challenge facing these recruiting companies is to set appropriate requirements and expectations for its general counsel candidates. While these requirements can be exacting, decision makers need to be realistic about identifying competencies that are truly important and relevant to the role in their company.

Being realistic at the outset of the search, and setting meaningful priorities and requirements will result in generating a strong pool of candidates from which one candidate will make an excellent fit. Companies who stay focused on long wish lists will not only narrow the candidate pool unnecessarily, but will also risk keeping a critical position open for several month, or make a hire who seems perfect on paper but who will fail because of cultural fit issues. Some of the competencies that companies should consider when searching for a general counsel include:

  • Combining strong technical skills, sharp intellect, and experience to resolve difficult, complex legal and business problems.
  • Being able to effectively manage diverse personalities and relationships, internally and externally.
  • Thinking outside of the box, and being able to come up with new and creative ideas in business and legal matters.
  • Leading others by communicating a compelling vision that moves individuals, teams, and the organization to perform at a higher level and embrace change.
  • Seeing the trees in the forest and being able to focus on critical tasks that add value.
  • Communicating effectively at all levels of the organization, in written and verbal communication.
  • Delegating by making individuals accountable, providing feedback, as well as recruiting, mentoring, and growing talent for current and future roles.
To meet the needs of a changing function, companies have to focus on lawyers who are flexible, who offer a broad base of practice, and who want to contribute through productive collaboration. Strong business judgment and the ability to impart immediate trust and legitimacy are also very important qualities. Finally, a general counsel must know how to deliver a message to people at all levels of the company, must be proactive, possess a strong level of self-awareness, and be driven.

3. Be Ready To Invest

In conducting a general counsel search, your organization needs to be ready to invest financially, as well as in terms of time and effort. Since the general counsel will act as the trusted advisor to the CEO, the process will be more successful if those conducting the search involve the CEO early and often. Rather than only including the CEO in the initial meeting or on the review of the final candidate(s), the CEO should be regularly included in each step of the process. To recruit the best, even in a down economy, companies also need to be willing to invest financially. While general counsels make transitions for a variety of reasons that are not always financially related, high performers are usually looking for comparable if not better compensation packages than what is being offered by their current company. Today’s general counsels are compensated at levels similar to other members of the senior management team. It is not unusual for a general counsel to be one of the top five most highly compensated company executives. What do the general counsels at the nation’s top companies earn? According to a 2009 Corporate Counsel survey, general counsels at Fortune 500 companies make:

  • An average salary of $596,393
  • An average bonus of $1.16 million
  • An average stock award of $1.1M
  • An average option award of $669,719
Given the high compensation lawyers at the general counsel level command, it is important for management to accept that it will need to offer a highly competitive compensation package to attract top talent. Compensation is even more of a factor if the company is in a troubled situation or has other challenges attracting candidates, such as geographical location, specialty area, etc.

4. Think Outside the Box

Companies that can establish disciplined yet flexible guidelines will be able to recruit outstanding candidate quickly and effectively. Technical skills, good business judgment, management skills, and fit with the organization are all critical. That said, there are certain areas where a company can show some flexibility and still be able to recruit excellent candidates without having to “settle.”

While companies tend to prefer to hire general counsels that come from their specific industry, some flexibility in this area can be afforded without having to compromise on competencies. If candidates in a company’s primary industry are in short supply, it may be appropriate to look to related industries for prospects. For instance, if a company is highly regulated, candidates from other highly regulated sectors can bring the type of experience a company would benefit from. Conversely, there can also be crossovers between industries that are not highly regulated, such as the consumer or industrial sector. While this might not apply to companies in certain industries that require industry-specific experience because of the specific regulatory nature or the complexity of the sector, such as healthcare or financial services, most other companies can benefit from considering candidates in crossover industries.

5. Consider Professionals

Today’s general counsel is a critical member of a corporation’s senior leadership – an accomplished legal professional who will be required to provide top-flight legal and business advice. Evaluating and quantifying the skills required when assessing candidates for general counsel positions can be challenging, even for the most experienced CEOs. Conducting a search for a general counsel is not only complex and challenging, but it is also a time consuming and costly process that a company cannot afford to miss. As a result, an increasing number of companies are turning to professional legal recruiting firms to fill their general counsel positions.

Legal recruiting firms can advise companies on the type of person and salary required to attract top talent, as well as devise strategies to recruit the right individual in accordance with the company’s needs and requirements. Professional legal recruiting firms maintain a constant stream of qualified candidates and potential job seekers. They are intimately connected with the legal community in both law firms and corporations. As a result, they can offer companies the type of qualified candidates they would not be able to find on their own through online or newspaper ads, alumni associations, applicant databases, job boards or other familiar sources of people. Most legal recruiters are also former attorneys. As a result, these legal recruiters tend to be better positioned than laypersons to evaluate another attorney’s skills and aptitude, and identify “great” from merely "good" attorneys. In other words, legal recruiting firms are designed to deliver faster and better results, saving a company both time and money.

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2009 GC Compensation Survey

Historically, general counsels at the nation’s largest companies enjoyed a certain amount of immunity from economic fluctuations. The past decade shows a nearly unbroken string of pay raises. Even through the previous recessions, these general counsels stayed largely untouched. However, according to a recent survey conducted by Corporate Counsel, it appears that this trend is no more.
While some indexes of general counsel pay rose, compensation by in large remained nearly flat. Why? Because executive pay has become inextricably bound with corporate performance. If the company doesn't do well, the GC might find a thinner pay packet. How thin? It's all relative. Make no mistake, these top company general counsels are still handsomely compensated for their hard work, but there is a chink in the armor.

General counsel at the nation’s top companies earned $1.8 million in pay and bonuses last year, an increase of 2.6%.

The breakdown, tallied by Corporate Counsel:

  • Average salary was $596,393, an increase of 5%(⇑)
  • Average bonus was $1.16M, an increase of less than 1% (⇑)

Bonuses were a combination of bonuses not tied to performance goals and “nonequity incentive compensation” paid for making performance targets.

"The world economy may be limping," reported Corporate Counsel. "Economic sectors like banking and manufacturing are still waiting for those green shoots to pop up, while the real estate market continues to search for the bottom. But last year the general counsel of the nation's largest companies still managed to get a modest raise."

Salary increases and generous bonuses generate great headlines. But that's not how most chief legal officers amassed their wealth over the years. One of the big attractions of being an in-house lawyer, in good times, at least, is the chance to own company stock. And that's held true even though the way companies distribute shares has changed dramatically.

At the same time, compensation tied to company shares fell:

  • Average stock award was $1.1M, a decline of 18% (⇓)
  • Average option award was $669,719, a decline of 7% (⇓)

Still, by the standards of a working population dealing with everything from mass layoffs to unpaid furloughs, top legal officers at Fortune 500 companies continued to earn a very decent living.

Usually the top paid corporate lawyer is the chief legal officer of a thriving big conglomerate. In the 2008 survey, however, the best-compensated lawyer was Gregory Doody, a bankruptcy expert hired to lead the Calpine Corp. out of bankruptcy, Corporate Counsel reports in a separate story. He took home $9.7 million in cash and bonuses last year; he has since left the company.

But those figures were tabulated last year. Will the overall picture for general counsels look bleaker in next year's survey? And will a sustained economic downturn in 2009 mean the end of $9 million bonuses, even for the general counsel of a thriving wireless telecommunications conglomerate? That remains to be seen

Here is the list of the 100 top-paid general counsels (total cash compensation):

  1. Gregory Doody, Calpine Corporation, TX, $9,743,621
  2. Donald Rosenberg, Qualcomm Incorporated, CA, $9,676,940
  3. Brackett Denniston III, General Electric, CT, $7,050,200
  4. Charles Wall, Philip Morris International Inc., NY, $4,194,538
  5. Alan Braverman, The Walt Disney Company, CA, $4,032,885
  6. Gary Lynch, Morgan Stanley, NY, $3,469,000
  7. Paul Cappuccio, Time Warner Inc., NY, $3,050,000
  8. Russell Deyo, Johnson & Johnson, NJ, $2,988,896
  9. Carrie Dwyer, The Charles Schwab Corp., CA, $2,974,399
  10. Louis Briskman, CBS Corporation, NY, $2,905,000
  11. Thomas Strickland, UnitedHealth Group, MN, $2,692,115
  12. Jon Walton, Allegheny Technologies Inc., PA, $2,587,733
  13. Peter Beshar, Marsh & McLennan Companies, NY, $2,563,750
  14. Michael Fricklas, Viacom Inc., NY, $2,440,300
  15. Albert Cornelison, Jr., Halliburton Company, TX, $2,420,000
  16. Alan Schnitzer, The Travelers Companies, NY, $2,350,000
  17. Charles Matthews, Jr., Exxon Mobil Corp., TX, $2,332,305
  18. Thomas Sabatino, Jr., Schering-Plough Corp., NJ, $2,181,343
  19. David Horn, AK Steel Holding Corporation, OH, $2,033,372
  20. Alan Crain, Jr., Baker Hughes Incorporated, TX, $1,976,595
  21. Sheldon Cammaker, Emcor Group, Inc., $1,968,750
  22. Marc Manly, Duke Energy Corporation, NC, $1,865,342
  23. David Drummond, Google Inc., CA, $1,826,251
  24. William Barr, Verizon Communications Inc., NY, $1,787,546
  25. Laura Schumacher, Abbott Laboratories, IL, $1,761,508
  26. Robert Armitage, Eli Lilly and Company, IN, $1,738,208
  27. David Smith, Archer Daniels Midland Co., IL, $1,728,400
  28. Julia Lambeth, Reynolds American Inc., NC, $1,725,850
  29. Raymond Bukaty, Western Digital Corp., CA, $1,675,000
  30. Leila Vespoli, FirstEnergy Corp., OH, $1,635,025
  31. Marc Firestone, Kraft Foods Inc., IL, $1,634,904
  32. Carol Ann Petren, Cigna Corporation, PA, $1,633,269
  33. Douglas Sgarro, CVS Caremark Corporation, RI, $1,593,318
  34. Richard Baer, Qwest Communications, CO, $1,566,209
  35. Charles Tanabe, Liberty Media Corporation, CO, $1,534,752
  36. J. Barclay Collins II, Hess Corporation, NY, $1,525,000
  37. David Savner, General Dynamics Corporation, VA, $1,501,250
  38. Arthur Block, Comcast Corporation, PA, $1,498,669
  39. Brian Miller, The AES Corporation, VA, $1,494,938
  40. Denise Keane, Altria Group, Inc., VA, $1,487,500
  41. C. Michael Carter, Dole Food Company, Inc., CA, $1,485,094
  42. John Halvey, NYSE Euronext, Inc., NY, $1,480,769
  43. Jay Stephens, Raytheon Company, MA, $1,469,146
  44. David Sudbury, Commercial Metals Company, TX, $1,385,810
  45. Robert Sharpe, Jr., ConAgra Foods, Inc., NE, $1,387,019
  46. J. Michael Hemmer, Union Pacific Railroad, NE, $1,353,000
  47. W. Burks Terry, Northrop Grumman Corp., CA, $1,341,320
  48. Grier Raclin, Charter Communications, Inc., MO, $1,339,327
  49. Hyun Park, PG&E Corporation, CA, $1,320,804
  50. Robert Osborne, General Motors Corporation, MI, $1,317,500
  51. James Garraux, United States Steel Corp., PA, $1,298,340
  52. Robert Reeves, Sr., Anadarko Petroleum, TX, $1,292,869
  53. Larry Hunter, The DirecTV Group, Inc., CA, $1,285,753
  54. C. Thomas Harvie, Goodyear Tire & Rubber, OH, $1,270,000
  55. Bruce Kuhlik, Merck & Co., NJ, $1,246,271
  56. Robert Walters, Energy Future Holdings, TX, $1,230,784
  57. Thomas Boudreau, Express Scripts, Inc., MO, $1,216,292
  58. Bryan Hall, Virgin Media Inc., NY, $1,206,891
  59. Noah Hanft, MasterCard Incorporated, NY, $1,198,250
  60. Steven Cossé, Murphy Oil Corporation, AR, $1,195,833
  61. Robert Schoonenberg, Avery Dennison Corp., CA, $1,192,958
  62. Joshua Floum, Visa, Inc., CA, $1,185,981
  63. Frank Steeves, Emerson Electric Co., MO, $1,160,000
  64. Terrence Linnert, Goodrich Corporation, NC, $1,156,515
  65. Donald de Brier, Occidental Petroleum Corp., CA, $1,151,000
  66. Gregory Butler, Northeast Utilities, CT, $1,142,216
  67. Steven Covey, Navistar International Corp., IL, $1,135,000
  68. Ellen Kaden, Campbell Soup Company, NJ, $1,133,333
  69. Joseph Listengart, Knight Inc., TX, $1,133,077
  70. Leonard Kennedy, Sprint Nextel Corporation, KS $1,132,895
  71. Ira Lederman, W.R. Berkley Corporation, CT, $1,115,435
  72. Peter Janzen, Land O’Lakes, Inc., MN, $1,111,915
  73. Vincent Maffeo, ITT Corporation, NY, $1,105,431
  74. Kevin Lilly, SPX Corporation, NC, $1,105,000
  75. Javade Chaudhri, Sempra Energy, CA, $1,104,687
  76. Dwight Rettig, National Oilwell Varco, Inc.,TX, $1,098,696
  77. Vernon Baker II, ArvinMeritor, Inc., MI, $1,096,567
  78. Ellen Fitzsimmons, CSX Corporation, $1,092,500
  79. J. Michael Luttig, The Boeing Company, IL $1,092,418
  80. James Benson, ADP, Inc., NJ, $1,087,314
  81. Cheryl Hodges, Omnicare, Inc., KY, $1,081,689
  82. James Hixon, Norfolk Southern Railway Co., VA, $1,078,750
  83. James Breedlove, Praxair, Inc., CT, $1,061,050
  84. Susan Lanigan, Dollar General Corporation, TN, $1,048,179
  85. Bart Colli, ARAMARK Corporation, PA, $1,037,981
  86. Scott Rozzell, CenterPoint Energy, Inc., TX, $1,035,513
  87. Kenneth Siegel, Starwood Hotels & Resorts, NY, $1,032,303
  88. David Leitch, Ford Motor Company, MI, $1,000,000
  89. Joey Loudermilk, Aflac Incorporated, GA, $983,588
  90. Hayward Fisk, Computer Sciences Corporation, VA, $979,050
  91. Mitchell Kosh, Polo Ralph Lauren Corporation, NY, $972,188
  92. Richard Mack, The Mosaic Company, MN, $964,167
  93. Charles Fenton, Black & Decker Corp., MD, $960,000
  94. Roger Cooke, Precision Castparts Corp., OR, $925,500
  95. Gary Bahler, Foot Locker Inc., NY, $901,421
  96. Gary Chadick, Rockwell Collins, Inc., IA, $897,420
  97. William Casazza, Aetna Inc., CT, $895,491
  98. R. Edwin Selover, Public Service Enterprise, NJ, $888,325
  99. James Diggs, PPG Industries, Inc., PA, $872,500
  100. Curtis Shaw, Celanese Corporation, TX, $872,114

Here is the list of the top paid women general counsels (total cash compensation):

  1. Carrie Dwyer, The Charles Schwab Corp., CA, $2,974,399
  2. Laura Schumacher, Abbott Laboratories, IL, $1,761,508
  3. Julia Lambeth, Reynolds American Inc., NC, $1,725,850
  4. Leila Vespoli, FirstEnergy Corp., OH, $1,635,025
  5. Carol Ann Petren, Cigna Corporation, PA, $1,633,269
  6. Denise Keane, Altria Group, Inc., VA, $1,487,500
  7. Ellen Kaden, Campbell Soup Company, NJ, $1,133,333
  8. Ellen Fitzsimmons, CSX Corporation, $1,092,500
  9. Cheryl Hodges, Omnicare, Inc., KY, $1,081,689
  10. Susan Lanigan, Dollar General Corporation, TN, $1,048,179

For a detailed breakdown of base, bonus, and options click on this link.

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Clear Channel Outdoor Holdings Names Its New General Counsel

Clear Channel Outdoor Holdings Inc. has a new general counsel: David M. Clark will serve as the company’s executive vice president and general counsel for the Americas.
Clark will report to Andrew Levin, executive vice president and chief legal officer for parent company Clear Channel Communications. Laura Toncheff will remain Clear Channel Outdoor’s deputy general counsel for the Americas on a part-time basis.

For general counsel job seekers out there, this was not a position open to the general public, but a position that was filled through an internal promotion. Clark has been a member of Clear Channel Outdoor’s legal team for the past five years and was most recently senior vice president and associate general counsel. Before joining the corporate world, Clark worked for a number of major national law firms.

“David’s broad industry experience and technical legal skills position him to become an important contributor to our management team,” says Clear Channel Outdoor-Americas President and CEO Paul Meyer.

Phoenix-based Clear Channel Outdoor (NYSE:CCO) has nearly 1 million displays in 50 countries.

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Twitter Hires Google Lawyer As Its First General Counsel‎

Twitter has hired a high-profile Google lawyer as its first general counsel, according to The Recorder.

Alexander Macgillivray, deputy GC for products and IP at Google, will take the legal reins at the popular San Francisco-based micro-blogging site, according to people familiar with the hire.

Twitter has not announced the hire, and while Macgillivray has tweeted that he's joining Twitter, he did not indicate in what role. The New York Times first reported that he'd be GC on Friday evening.

"You can't tell what issues [Twitter's] going to face," said David Kramer, a litigator with Wilson Sonsini Goodrich & Rosati who has worked with Macgillivray. "With Alex you've gotten someone who's navigated uncharted territory before -- I can't imagine a better choice."

Macgillivray helped Google fend off legal challenges to its ambitious and controversial book scanning efforts. The company settled a lawsuit stemming from the project with authors and publishers, but the agreement is now being probed by antitrust regulators in the Department of Justice.

In a Saturday blog post, Macgillivray wrote that "working in Google Legal has been a dream job."

On Sunday, the Google lawyer appropriately told the world via his Twitter account that he was "Glad to be joining @ev and all the other great folks at Twitter, sad to be leaving so many good friends at Google."

Macgillivray did not return a voicemail left at his Google office on Monday afternoon.

A former Wilson Sonsini associate, Macgillivray joined Google as an IP lawyer in 2003. His role was expanded to product counsel, and he handled all legal issues resulting from the company's new products, like Google book search.

"He has a very deep technical base," Kramer said. "He came of age in the practice of law during the Internet era and brings an understanding of Internet legal issues to the table that is pretty much unrivaled."

So far Twitter hasn't had that many legal challenges.

As Ian Ballon, an expert on Internet law at Greenberg Traurig puts it, "The 140-character limit narrows the scope of legal liability proportionately."

Twitter did briefly face a lawsuit from St. Louis Cardinals' manager Tony La Russa, who was upset over a fake profile on the site. But La Russa dropped the suit without winning a settlement.

Until now, Twitter has relied on Fenwick & West for most of its legal work.

Michael Kwun, a lawyer at Keker & Van Nest who worked with Macgillivray at Google, said he's got a good business sense, something needed at an Internet startup.

"He has great business acumen -- he has a sense of what the business issues are as well as the legal ones," Kwun said. "He's always been someone who the product managers and the engineers could go to."

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