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Two years ago, New York Attorney General Eliot Spitzer’s supervisor from his days as a prosecutor in the Manhattan district attorney’s office was asked to describe the young lawyer’s career when he was prosecuting organized crime in the carting and construction industries. The former supervisor, Michael Cherkasky, said that it wasn’t about putting someone in prison. “The objective,” he said, “was to change the industry.” Last month, their career paths crossed again when Spitzer launched his latest effort to reform an industry. Cherkasky was hired to take Jeffrey Greenberg’s place as Marsh & McLennan Cos.’ CEO after Spitzer sued the giant insurance broker over alleged bid-rigging. The attorney general also paved the way for regime change, announcing that he would not negotiate with the company’s “leadership,” whom he accused of misleading his investigators. Greenberg resigned a short time later. According to the Wall Street Journal, General Counsel William Rosoff will be next. Some people wonder which was Cherkasky’s more important qualification: his legal background or his relationship with an attorney general he calls “a good friend” and with whom he plays tennis. Quite a few executives are struggling to put out fires these days. And, though statistics suggest that only a fraction of them hold law degrees, Cherkasky is by no means alone. He said in an interview last week that his legal background was “a plus,” but it wasn’t why he was tapped for the post. When Spitzer sued Marsh, accusing it of rigging bids and steering business to insurance companies in return for contingency payments that were not disclosed to customers, Cherkasky was already a CEO. He worked at Kroll Inc., a publicly traded risk-consulting business that Marsh had acquired only months earlier. “If I hadn’t had public company experience, and if I hadn’t shown the ability in the four or five months here to understand the business and where we were going, I don’t think the match would have been made.” He acknowledged that understanding “the regulatory process,” “the people who were involved” and “how to approach a resolution,” were all important. But he dismissed the importance of his relationship with the attorney general, noting with a laugh that he isn’t the only boss Spitzer has ever had. Cherkasky’s predecessor was also a lawyer, but unlike Greenberg, the new CEO eschewed a seat on the board. “I think there should be a separation,” he said, echoing a position corporate governance gurus frequently espouse. “There’s a board function and there’s an operational function, and I didn’t want to wear both hats.” He quickly ended the contingency payments – $800 million, which represents more than a third of the company’s profits, he said. Recovering from that loss is one of his larger challenges. But he overcame even larger ones, he insisted, when he took over at Kroll three years ago. “Kroll had lost money for six straight quarters, had $80 million in debt and was about to get an opinion from its auditors that questioned its viability.” It had nothing like the resources at his disposal now. “This is a much easier turnaround than that was,” Cherkasky said. CEO-lawyers Other CEOs with legal training include Charles Prince, who took over the top job at Citigroup Inc. last year. So far he’s had a bumpy ride. In the latest of a succession of scandals, Japan’s bank regulator ordered Citigroup to close its private banking business. Last month, Prince flew to Tokyo and, bowing deeply before the cameras, apologized for his company’s “failure to comply with legal and regulatory requirements in Japan.” As part of his compliance campaign, the lawyer has announced an ethics program that will train 30,000 managers worldwide. In August, William Kirsch agreed to leave Chicago’s Kirkland & Ellis to take over as CEO and president of the Midwestern insurance company Conseco Inc. Kirsch had worked closely with the company after it filed for bankruptcy protection in 2002. Then he served as general counsel, even as he continued his practice at Kirkland. He may have sealed the deal when he helped negotiate a $15 million settlement in August with the Securities and Exchange Commission and Spitzer over allegations of market timing in its variable annuities. (On the other hand, the company may have calculated that a lawyer was less likely to run up the kinds of unpaid loans for which it is suing nine former executives and directors.) No one has suggested that a law degree is a well-worn path to the executive suite. Only 10.8% of the CEOs of S&P 500 companies have law degrees, according to Spencer Stuart, the executive recruiting firm, which found that 8% had actually worked at some time in a related job. By contrast, 38% hold MBAs and 24% have worked in finance at some point, and the same percentage in marketing and operations. But in some industries a legal background seems, if not common, less uncommon, said David Yermack, a professor at New York University’s Stern School of Business. “You would expect lawyers to be CEOs in industries where there’s a lot of regulation,” he said. “And utilities and financial services are very well represented.” Yermack himself pursued a joint MBA-JD degree, not because he expected to practice law, but because he wanted to learn to think critically, he said. Northwestern University runs one of the most popular joint programs. “I wouldn’t argue that being a lawyer makes you a better executive than other kinds of training,” said David Van Zandt, the dean of Northwestern University School of Law, “but I think it is excellent training.” These days, he said, “anyone who gets a CEO position has to know a lot about law, whether or not he has a degree.” More industries are regulated, and even small businesses often sell beyond a local area, so handshake deals have been replaced by contracts that are increasingly complex, he said. And lawyers may be better equipped to deal with questions of ethics and conflicts of interest than executives without their training. On the downside, he added, lawyers typically avoid risks while CEOs need to take them. Identifying a problem and solving it are different, said William Holstein, editor of Chief Executive magazine. Lawyers are “careful, legalistic.” CEOs need to consult them, he said. “But CEOs need to create motivation and incentive and bring large groups of people around them to share a vision of where the company is going. That is not something they teach in law school.” As for Cherkasky, though he doesn’t believe his degree landed him the job, he called legal training a “phenomenal foundation” for solving problems. Apparently he’s sold the message at home: His son and daughter are now in law school. If he can sell to Marsh’s customers that effectively, he should be all right.

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