Ten years ago Frank Fernandez would have had little chance of becoming the GC of a high-profile public company. He just wouldn’t have had the right pedigree–he didn’t attend a prestigious law school, never worked for a big-name firm and practiced law far from the bright lights of a big city.
Today he’s the model GC.
Fernandez grew up in Syracuse, N.Y., with his Spanish father and Cuban mother. After earning a business degree in 1971 from St. Bonaventure University and then spending a year in the U.S. Marines Corps,Fernandez went on to work for Haskins & Sells (now Deloitte) as an auditor. His clients included large banks and manufacturing companies. During his six years at Haskins, Fernandez became intrigued by the role taxes were playing in his clients’ business decisions. That intrigue took him to Albany Law School and then New York University where he received a master of laws in taxation.
For the first 10 years after law school, Fernandez worked in two small firms in Albany as a corporate tax attorney. Then around 1989 he formed his own firm–Fernandez, Burstein, Tuczinski & Collura. Most of his clients were private companies, though a few were small public companies. One of those companies was GE Power Systems, which is now part of GE Infrastructure. The CEO of the division was Robert Nardelli, whose name was kicked around as a possible replacement for Jack Welch.
Nardelli joined Home Depot as CEO in 2000 and realized that he not only needed someone with strong legal skills to run the company’s legal department, but also someone with a financial background who could handle the pending wave of accounting and governance reforms that were about to hit corporate America. There were few lawyers who possessed both skills. Fernandez was one of that rare breed.
Q: In some respects you have the ideal background to be a GC in today’s environment. Did you plan it that way?
A: I would love to say I did, but that would be telling the biggest lie in the world. When I joined Home Depot in April 2001, I thought I was coming to Atlanta to be the general counsel and to fundamentally practice law and be the chief legal officer. However, 40 percent of what I do today is finance related.
Q: Would you be able to do your job if you didn’t have the finance background?
A: I don’t see how I could. There are a lot of attorneys and general counsel who don’t have an accounting background, but I think that they end up being driven to it. Take Section 404, for example. You really need to understand what a material weakness is. You have to understand what internal controls are and how they work.
Q: What was the state of Home Depot’s legal department when you took over?
A: We were a $45 billion company with only 20 lawyers. We had no litigation department and yet had 2,000 general liability cases. To say it was a challenge is really an understatement. Bob [Nardelli] and I had three goals in mind. The first was that we wanted to build a world-class team that understood and was committed to understanding the business. The second was that we would build a reliable and sustainable compliance program. And third was that we would build a department that would function as a strategic partner to both the business units and functional areas.
Q: What has been your biggest challenge so far?
A: It was rebuilding the department. All of our litigation was outsourced. We had a third-party administrative organization managing more than 400 law firms. It was bizarre. So the first thing that we did was we said well, we should take ownership of this and so we started to build a litigation department. We had the same issue on the labor and employment front.
Q: Where did you get the talent?
A: Of the 20 lawyers who were here, there are about eight or nine who worked through the transition. Then the other 50 were new. So some were partners at outside law firms and others were from other legal departments. For instance our head of operations attorney is a former GE attorney.
Q: You hired your first IP attorney a couple of years ago. Why does Home Depot need IP attorneys?
A: One of our growth strategies was to ensure Home Depot was creating innovative merchandise. In others words, one of the factors that we saw as being critical to distinguishing ourselves from our competition was having innovative and exclusive merchandise. Our merchants are very creative people and oftentimes would think of an idea or a product or create something and we would have it manufactured, but we never capitalized on owning the IP rights.
Q: What’s the strangest legal issue you have had to deal with so far?
A: It is probably the toilet seat issue [a customer recently sued Home Depot after becoming glued to a toilet seat in a Colorado store]. I think that case is the classic poster child for the fact that we all need tort reform. I mean the initial demand was $3 million because of all of the stress.
Q: I understand that unions have stated they will target companies such as Home Depot and Target to increase their ranks. How do you defend against that?
A: That’s always going to be a concern for us. From our standpoint the way we look at it is we want to be the employer of choice. We do a very good job of communicating with our employees what our pay and benefit packages are and quite frankly, they are so attractive that we’ve not had any serious challenges by any of the unions.
Q: What’s your proudest accomplishment so far?
A: Creating a compliance function that is reliable and sustainable and one that our business partners have fully accepted and endorsed. Second is knowing that the legal team is happy doing what they are doing.
Q: Home Depot sponsors a NASCAR team. Do you have any involvement in that?
A: We do the contracts. We work hand in hand with the marketing department on those contracts.
Q: Do you go to the races?
A: I do, but I have to admit that I’m not a big racecar fan.
Q: When I Googled your name it came up that you once owned shares in the Saratoga Raceway–a harness racing track. What’s the deal with that?
A: It was an investment I had. We don’t have any major sports such as the Mets or Knicks teams in upstate New York. So what’s big time up there is horse racing. It’s wonderful horse country and the racetrack was a fun thing to be affiliated with.
Q: Do you consider yourself a do-it-yourselfer?
A: No. I’m a do-it-for-me. When you get to be over 50, you don’t climb up on the roof anymore. If I have some free time, I use it in other ways.