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Oversees 15 attorneys and nine paralegals at the 45,000-employee Avon. Name and title: Gilbert L. Klemann II, senior vice president, general counsel and secretary age: 52 shareholders calling: Proposals by shareholders are usually like habeas corpus petitions-often filed, seldom approved. This year, in the wake of the accounting scandals and other well-publicized corporate malfeasance, investor-instituted reforms have garnered more support at annual shareholder meetings. In May, at the annual meeting of Avon Products Inc., shareholders passed two investor resolutions: 56% approved a resolution requesting that Avon expense its stock options, and a whopping 80.5% supported a call for “declassification,” or annual elections of all board members. Klemann is not surprised by this rare display of corporate democracy. “This year, there has been a high level of support for almost any governance-related shareholder proposal,” he said. Institutional investors, which hold 87% of Avon’s outstanding shares, are particularly receptive to shareholder proposals promising corporate reforms, said Klemann. Avon’s board is giving serious consideration to the two approved proposals, said Klemann. Both measures are precatory. door-to-door domain: New York-based Avon manufactures and markets cosmetics and other beauty products, toiletries, jewelry, apparel, home products, vitamins and an aromatherapy line. Avon sells its products to a global network of independent “sales representatives,” who, in turn, sell to the “end users”- usually friends, neighbors and co-workers. Avon has numbers to back up its claim to be the “largest direct-selling company in the world”: 2002 sales of almost $6 billion, profits of $534.6 million, 3.9 million sales representatives, 45,000 employees, distribution in 143 countries and 17 manufacturing facilities worldwide. Although it is no longer politically correct to call them “Avon Ladies,” the company’s sales representatives are overwhelmingly female, as are most users of Avon’s products. Women are also well represented in the executive suite, with Chairwoman and CEO Andrea Jung, President and Chief Operating Officer Susan Kropf and other women in charge of information, human resources and Asia-Pacific operations. klemann’s crew: Klemann oversees an in-house law office of 15 lawyers-13 in New York and two in the United Kingdom-and nine paralegals. His deputy general counsel are four vice presidents, with responsibilities for U.S. legal issues, international matters, corporate legal issues and intellectual property. Avon’s 2002 annual report listed Klemann’s salary as $418,836, with a $505,744 bonus. Klemann recently helped to revise Avon’s financial reporting and corporate governance policies to comply with the Sarbanes-Oxley Act and the new Securities and Exchange Commission (SEC) and stock exchange requirements. Avon’s new procedures include detailed checklists, conference calls and internal certifications designed to ensure the accuracy of financial statements in the company’s 10Q and 10K forms and other public filings. As a final check, Klemann and the other senior executives give the documents a page-by-page review before the CEO and CFO certify the numbers for the SEC. nonemployment law: Avon’s sales representatives “really are the backbone of the business,” said Klemann. However, this backbone is not part of Avon’s corporate body. Klemann and his staff work hard to ensure that the sales representatives meet the legal definition of independent contractors, rather than count as employees. Avon’s lawyers help to spell out this nonemployment relationship in recruitment materials and contracts with representatives, said Klemann. Representatives must keep their own financial records and pay their own Social Security taxes. They must also pay for products upon delivery, regardless of resales to other customers. litigation: In addition to minimizing corporate taxation, Avon’s independent sales force also holds down its employment litigation docket. Still, with 46,000 workers and worldwide manufacturing and distribution, Avon faces “run of the mill” employment litigation, patent and trademark suits and contract cases, said Klemann. A handful of cases warrant specific disclosure in Avon’s SEC filings. For example, Avon is defending a $145 million shareholder suit in New York challenging a stock reissuance in the late 1980s designed to trim dividends. The case was filed in 1991, and languished for years before a bench trial in November 2001. The parties are still awaiting the court’s decision. Avon has a lengthier legal feud with Sheldon Solow, the landlord of the company’s former headquarters building in New York. According to Klemann, Avon has been in litigation against Solow over various matters for more than 30 years, virtually since the start of the company’s lease. “We don’t like litigation, but we’re comfortable with it and if we feel that our interests are at stake, we will defend anything,” said Klemann. When litigation can’t be avoided, Klemann prefers the “known commodity” of judges to private arbitrators. He thus eschews alternative dispute resolution clauses in contracts. principal outside counsel: For general corporate matters, Klemann calls on Chadbourne & Parke; Wachtell, Lipton, Rosen & Katz; and Davis Polk & Wardwell, all of New York. Litigation firms include Chadbourne, Wachtell and New York’s Weil, Gotshal & Manges. Avon’s main IP counsel is New York’s Kelley Drye & Warren. route to the top: Klemann grew up in New York’s suburban Westchester County, the son of an IBM executive father and homemaker mother. After graduating from the College of the Holy Cross in 1972 and Fordham School of Law in 1975, he signed on as an associate at Chadbourne, becoming a partner in the corporate department in 1983. At Chadbourne, Klemann worked almost exclusively for the diversified holding company American Brands, which hired him as general counsel in 1991. In 1999, Klemann rejoined Chadbourne as of counsel. He was hired as Avon’s general counsel in 2001. personal: Gilbert and Patricia Klemann celebrated their 30th anniversary in June. Son Gilbert, 24, is an analyst at Goldman Sachs in New York. Daughter Tricia Klemann Kapp, 27, formerly a lawyer in the New York office of Chicago’s Winston & Strawn, is raising her 16-month-old daughter, Laura. last book and movie: John Adams, by David McCullough. Not a film buff, he recalls Titanic as his last movie. -William C. Smith

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