Krispy Kreme's GC: Think Like an Outsider

Mary Welch

Daily Report

02-21-2013

Darryl R. Marsch has served as senior vice president and general counsel for Krispy Kreme Doughnuts since September 2008 and as corporate secretary since January 2011. Marsch joined Krispy Kreme in May 2007 as vice president and associate general counsel. Prior to that, he was senior counsel for R.J. Reynolds Tobacco Co. from November 1998 to May 2007. From September 1991 to October 1998, Marsch was an associate at Jones Day in Washington, D.C.

Born in New Braunfels, Texas, Marsch is a 1991 graduate of the University of Texas School of Law, and he earned his undergraduate degree in 1987 from the University of Texas where he was Phi Beta Kappa.

Marsch has served on the board of directors of the Autism Society of North Carolina since 2007. He served on the board of directors of the Arts Based Elementary School, a charter school in Winston-Salem, N.C., from 2003 to 2007.

He lives in Winston-Salem with his wife and son. He is a big fan of Bobby Flay and cooking. In 2009, he had two recipes in the top 10 of a Bobby Flay cooking contest on Food Network.com: a grilled sockeye salmon with a blackberry merlot lacquer with grilled asparagus and a morel-chardonnay vinaigrette, and chipotle spiced pear and white wine mussels.

Lately, he is obsessed with P90X, an extreme fitness training program, and he's a Formula 1 fan who cheers for Team McLaren Mercedes.

Daily Report: Describe your department and your role in it.

Darryl Marsch: I am the general counsel and secretary as well as a senior vice president. I serve on the senior management team and report to the CEO. We have three attorneys in our department, a legal assistant and an administrative support person. We all do a little bit of everything, but the other two attorneys try to concentrate more in real estate and employment law.

DR: Your department is relatively small in a company with complex matters, particularly on franchise matters. How do you cope?

DM: Being a small department means that we get our hands dirty. We all know the different matters that we have worked on and benefit from helping each other by sharing experience. We also have excellent outside counsel with whom we build long-lasting relationships. I think that is a key to our success as a department.

Our counsel is vested in our company's success and understands our business from a historical, strategic and personal perspective. They know that they are not one reverse auction away from losing us as a client.

I think that kind of attorney-client relationship—one where the client is just another vendor—is very short-sighted and unhealthy. Unfortunately, it seems to be the view that consultants and corporate counsel associations advocate. We think that we get much better value from our attorneys by having long-term relationships built on mutual trust.

DR: Do you use outside counsel? If so, who, and for what areas?

DM: We use outside counsel in most areas. Corporate and securities—Womble Carlyle Sandridge & Rice and Sullivan & Cromwell; litigation and IP—Kilpatrick Townsend & Stockton; international trade—Paul Hastings; franchise—Gray Plant & Moody. We use other lawyers for various other things, too.

One thing that we have done is focused on building relationships with women and minority-owned law firms. We have found some great lawyers that have gotten us great outcomes that way. These are lawyers that often don't get the chance (for historic reasons) to work with larger companies. Working with the National Association of Minority and Women Owned Law Firms, NAMWOLF, we have found excellent counsel, like Rutherford & Christie in Atlanta.

DR: What are your pet peeves in dealing with outside counsel?

DM: I like lawyers to tell me what they really think. Too often lawyers are unwilling to give their best estimate of what they think will happen. Almost no situations are 50/50 odds, but lawyers always give that as an answer because they are uncomfortable with staking out a position. Give me your best advice, the odds and a recommendation, I say. Stake out your position in no uncertain terms. Who wants a lawyer if you can never tell what his position is?

DR: What was your biggest challenge going to the client side?

DM: I worked in-house at R.J. Reynolds for eight years prior to coming to Krispy Kreme. The transition from outside to in-house counsel was, I think, a pretty simply one. I have always had the approach and attitude of an outside lawyer, giving straight-up legal advice uncolored by how it might be received by the client.

And I think of my company as the client, which, at the end of the day, it is. I take care to separate my legal advice from my business judgment.

Forcing business views on a client by dressing them up in legal guise is not appropriate, and ultimately undermines the credibility of the legal advice. Being deeply involved in the business—that means understanding how products are made, marketed and accounted for—and providing input on business strategy are immensely rewarding, and I have found that clients welcome my involvement.

Ironically, the more that a GC understands the business, the more respected she is as a lawyer.

DR: Krispy Kreme has had some SEC issues in the past. What advice would you give to other GC in dealing with SEC issues?

DM: Practice patience. I've worked on more government investigations than I can count. Krispy Kreme's SEC investigation took five years to resolve. Your clients will become frustrated at the slow pace, so keep them well informed, even if it means saying that you are waiting on the SEC to get back to you.

A long investigation gives you time, though, to build up credibility with the investigators and some mutual respect. Those are valuable commodities when you are at the table hammering out the final documents to resolve the matter.

DR: The company also has had some executive upheaval. What is the best advice you can give in dealing with a board wanting change, especially when it deals with your boss?

DM: Again, approaching the board with the attitude of an outside lawyer—it's the only lawyer I know how to be—is key. The CEO is my boss, but he is not my client—the company is. Calling things straight down the middle, while knowing that your advice could be disregarded or that you could be dismissed, is what the company deserves. Shading advice to appeal to what you think the board wants to hear is really a road to disaster for a GC.

DR: Your background is in litigation. What is your overall philosophy on litigation?

DM: Prepare to try cases. You will get the best outcomes if you are prepared to litigate, appeal, and appeal again. That best outcome might be a settlement, but a settlement driven by the will to litigate is going to be a smart, well-informed settlement. I am not a fan of arbitration, except in international contexts. I don't think that it saves time or money.

DR: Your department recently was honored with several awards by Corporate Secretary magazine, including most innovative CSR disclosure policy. Tell us about your innovative CSR [corporate social responsibility] disclosure policy. What are the advantages?

DM: Actually, we won Corporate Secretary magazine's 2012 Best Corporate Governance Team Award. We were really proud of that because it shows how far the company has come since the SEC investigation. We put in best-practice governance policies and our board and CEO set the right tone from the top. It was quite an achievement to be nationally recognized.

DR: You also were a finalist in the "Best Use of Technology" award. What was that for and how does it benefits your department.

DM: We were nominated for Best Use of Technology, but didn't win, which is OK. We made some progress, but I would not say that we were unique. Notably, we moved to an online board portal this year. It provides us an easy way for directors to view all board materials, even historic ones, from their iPads. It also enhanced the security of our communications.

DR: What is your biggest frustration in franchise law? How would you change it?

DM: Countries, particularly in Asia, are adopting franchise registration and disclosure regimes. In theory, it's a fine idea. But in practice, they are about 50 years behind the West in terms of striking the right balance between protecting franchisees and allowing franchisors to efficiently conduct business without undue red tape.

China and South Korea have two good examples of franchise regulations that need to evolve away from legal formalism toward more business-minded schemes. In South Korea for example, a franchisor is required to provide lengthy disclosures in Korean, even to a franchisee with whom it has done business for 10 years or more. They'll catch up, but not in my lifetime.

This article originally appeared in the Daily Report.