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When Ben Heineman asks for help, lawyers gather. Last October, Laurence Tribe put down his Harvard Law School lecture notes and took off for Fairfield, Conn. There he met up with Carter Phillips, head of Sidley & Austin’s Washington, D.C., office and one of the nation’s leading U.S. Supreme Court advocates. They had been invited to a strategy session with Heineman, the famed general counsel of General Electric Co. He had a plan for fighting off the federal government that he wanted to test one more time before taking it public. At issue was GE’s legacy of dumping toxic PCBs into New York’s Hudson River. Two of its plants had poisoned the waters for 30 years. Under intense public pressure, GE stopped the pollution in 1977 and has fought an aggressive defensive action ever since. GE settled with a group of angry commercial fishermen. GE tried to cap the pools of PCBs that nestled just offshore. GE even sponsored scientific research to pinpoint the rogue chemical’s potential for lethal mischief. But while the company bobbed, blustered, and lobbied, it desperately sought to avoid one remedy — an order to dredge the river bottom. The cost was enormous: Estimates ran to at least a half-billion dollars. The public relations disaster was palpable. And there was a potential, company advocates insisted, for a cure that only inflamed the disease; the dredging might do more harm to the river. As federal regulators from the U.S. Environmental Protection Agency closed in last year, Heineman planned a counterstroke. The EPA seemed to be considering a dredging order based on a particularly onerous section of the 20-year-old Superfund statute. Under the provision, the feds could order a site cleanup without giving corporate polluters a chance to object until long after their money had been spent. To Heineman and his litigation chief Brackett Denniston III, this seemed like a due process violation ready to be toppled. For two hours on October 23, Tribe and Phillips met with Heineman, Denniston, and GE’s vice president of corporate environmental programs, Stephen Ramsey, at GE World Headquarters. It was the usual gloriously appointed corporate holy of holies, with one special touch. On the third floor where Heineman works, down the hall from the even more legendary figure CEO Jack Welch, all the executive suite doors slide open electronically. “Just like Emperor Ming’s in ‘Flash Gordon,’ ” Heineman delights in telling visitors. The lawyers turned the issue inside out. Heineman was offended by Superfund’s affront to generally accepted administrative law norms. The two outside consiglieri left “ committed” to the case and “comfortable” with the claim. Five weeks later with Tribe acting as lead lawyer, GE filed in U.S. district court in D.C. The EPA followed with its dredging order just one week later. This was a classic Heineman maneuver. It was purely cerebral: He has never visited the dumping site or met the EPA lawyer in New York who has pursued GE, like Ahab, for a decade. It challenged basic assumptions: Simply put, Superfund may have been 20 years old, but its regimen was hardly immune to question. And its execution relied on top talent: Phillips and Tribe are acknowledged masters of the constitutional skirmish. Heineman has been at the top of this game since 1987, when Welch wooed him to GE with the promise of building a world-class legal department and offering a world-class compensation package. Welch honored both pledges, but he leaves this coming December. Heineman will stay on as long as CEO-designate Jeffrey Immelt wants, and he won’t admit to thoughts of his next career move. Indeed, the 57-year-old Heineman discusses the future gingerly. His 10-year ongoing battle with skin cancer has put long-range planning into perspective. And after running a 775-lawyer department for a $130 billion conglomerate, what could be next? His interests are wide-ranging, his “checkered career” (his phrase) too hard to pigeonhole. Maybe a stint in academia, or at a think tank, or in a senior-level government job. “Ben’s singular accomplishment at GE has been to build a great organization. Like all superb leaders, he put in place something that is larger than himself,” says GE litigation chief Denniston. But “Jack [Welch] is replaceable, in that another very talented person is filling his shoes. So it is with Ben.” Says Heineman: “Somebody will probably come in after me and say, ‘Old Ben, you know, we really have to change what he did.’ It’s just the nature of things, I think, when someone new comes in.” When he goes — if he goes — Heineman will leave behind a changed landscape at GE and in legal departments around the world. He’s famous for having fundamentally shifted the status of corporate counsel. During his time, in-house departments became destination sites for big-firm partners and other talented types who sought first-rate work and corporate-style rewards. (In 1999 he was GE’s fourth-highest-paid officer, at $2.6 million, plus a container of options.) Heineman is not shy or unnecessarily modest about his achievements. But because of the company’s size, reach, and resources, he hesitates to draw widely applicable lessons from his experience. That’s where we rush in. A close examination of his work arguably yields an outline for corporate counsel. Ben’s Best Practices may not yet be Jack Welch and the GE Way, but that’s more a failure of imagination than anything else. Maura Abeln Smith worked for Heineman for eight years before leaving to become GC at Owens Corning. There she runs a 25-lawyer department and has managed that company’s asbestos litigation morass: “I’ve adopted the GE style of being bold, and fast, and creative. Sometimes when I get stuck, I think, ‘What would Ben do?’ ” Here are seven answers to the question. LESSON ONE: HIRE SMART This starts with Heineman, who in 1980 was called by The New Republic “the possessor of the best r�sum� in America.” Harvard College. Editorial chairman of the Harvard Crimson. Rhodes Scholar. Yale Law School. Editor in chief of the Law Journal. Clerk to U.S. Supreme Court Justice Potter Stewart. Public interest lawyer. Partner of Edward Bennett Williams. Prot�g� of Joseph Califano, Jr. Managing partner of Sidley & Austin’s Washington, D.C., office — all by the time he was 40. With Welch’s explicit blessing and bankroll, he went out to hire more of the same. “The only thing I’ve done,” says Heineman, “is accumulate and hire a lot of great people, and that really is the truth.” Recent hires include: Peter Solmssen, a Morgan, Lewis & Bockius partner brought in as GC of GE Plastics; Robert Sloan, former managing partner of McKenna & Cuneo’s Brussels, Belgium, office who’s now the GC of GE Industrial Systems; and Ivan Fong, a former Covington & Burling partner who was a deputy associate attorney general in the U.S. Department of Justice when Heineman convinced him to become GE’s senior counsel for e-commerce and information technology. The alumni association is every bit as impressive, including those who have become GCs at other corporations: Jeffrey Kindler of McDonald’s Corporation; International Paper Company’s William Lytton; and Owens Corning’s Abeln Smith. GE is like a graduate school in business, explains Kindler, who was the head of litigation there and now is both GC of McDonald’s and CEO of Boston Market, Inc. “In terms of hiring people, basically we were able to meet comp,” Heineman says. “The equity piece is the differentiator. Everybody’s done well. But some of the key people who came with me early, in the late eighties, have all done quite well, just because the stock is five times higher and all those good things.” The money was necessary but not sufficient. “The practice had become less attractive, and GE had an outstanding reputation,” he says. “Virtually everybody that I hired was intrigued with the challenge of coming to work for what was even then the world’s best company.” Says a former senior transactions counsel at GE Appliances, Peter Reinert: “Historically law departments had the reputation of really doing more of the mundane legal work, and of hiring out the more interesting matters.” (Reinert is a partner at Orlando-based Akerman, Senterfitt & Eidson.) “Ben felt correctly that there was enough challenging work at GE, that he could hire the people to do it in-house.” Heineman says that, except for GE Capital, whose nonstop dealmaking keeps outside transactional lawyers tied to their desks, the ratio of GE work done by in-house counsel versus outside counsel is 60:40 — the exact opposite of what it was when he joined in 1987. There are now 475 outside firms on GE’s roster, adds Suzanne Hawkins, senior counsel in charge of legal operations. And that’s down from 500 since just last year. The winnowing is the result of an ongoing evaluation of firms on the basis of quality, cost, and efficiency. All this legal talent can clog the career paths. Add to the normal competition Heineman’s desire to use top-job openings as recruiting opportunities, and the result can be bruised egos. The department has lost lawyers who were tired of waiting to move up — or so some of them say privately. “There was some resentment about continued hiring from outside — a feeling that ‘Hey, the talent is here — you’ve had it for the last five to 10 years you’ve been upgrading. You don’t need to go outside anymore,’ ” says one former GE lawyer. More than 85 percent of GE’s in-house department has turned over since Heineman began. Still, even the critics say GE remains a place to gather experience and go on to glory. “ Though the lack of opportunity for upward mobility wasn’t all that great,” says another former lawyer who, like so many other defectors, went on to become a GC, “I enjoyed working at GE. I learned a lot. And I hardly ever run into anything I haven’t dealt with before.” LESSON TWO: BUSINESS MATTERS Heineman doesn’t want his lawyers — or himself — stuck in a legal ghetto. From the beginning, Welch has included him in business strategy. Last October, Heineman helped Welch work out the exact language used in a note faxed to Honeywell CEO and chairman Michael Bonsignore, who was in the middle of a Friday afternoon Honeywell board meeting considering a buyout offer from United Technologies. The note effectively said, “Let’s us do a deal instead.” Bonsignore bit. The next day Welch, Heineman, and about five or six others convened in Welch’s New York City apartment to group-think their strategy. Later that Saturday afternoon, negotiations with Honeywell at the New York offices of Skadden, Arps, Slate, Meagher & Flom (Honeywell’s outside counsel) began, with each member of the GE team, Heineman among them, handling his own list of deal points. Heineman has spread his 775 lawyers across GE’s 13 divisions. Each has its own general counsel, chosen by the division’s CEO from a list Heineman provides. In turn, each GC is staffed with high-quality specialists who serve each business division. These specialists meet periodically for training and to share best practices, but their responsibilities are primarily to their business groups — GE Plastics, or Engines or Medical. Meanwhile, back in Fairfield, Heineman put together a pantheon of demigods, national experts in each practice area who can support the 13 divisions while also tending to overall policy. Litigation’s Denniston came from Goodwin Procter; Pamela Daley of Transactions from Morgan, Lewis & Bockius; Tax’s John Samuels from Dewey Ballantine. Each has a small staff and large access to Heineman. “We try to integrate by practice group, by bringing the specialists together,” he says. “But one of the eternal tensions we’ve got is lawyers working for the individual businesses as opposed to working for the company as a whole.” Some lawyers get so involved in the business side that they pack up and go over permanently. Four former division general counsel have made the move. Former GE Appliances GC Jay Lapin became the president of GE Japan; former GE Power Systems GC Frank Blake took over as senior vice president in charge of GE’s corporate business development; and Henry Hubschman left the GC job at Aircraft Engines to be president and CEO of GE Capital Aviation Services. The most recent move was by Richard Cotton, a Harvard classmate and longtime NBC GC. In January he became the CEO of CNBC Europe. “GE is somewhat unique, in that they’re very open about lawyers going over,” says Jonathan Lindsey of Major, Hagen & Africa. “Other companies don’t credit their lawyers that way.” LESSON THREE: TEACH YOUR LAWYERS WELL Even before the advent of Welch and Heineman, GE was famous for its in-house training programs. By many accounts, Welch turned these efforts into an obsession. His Hudson Valley conference center, known as Crotonville, became an in-house business school. It was a place to send “high-potential” employees from around the empire. They learned, they networked, they carried the mantle of the corporate chosen. Heineman took that model and last year inaugurated a course, inspired and created by Daley and Samuels, called the Advanced Business Course for Lawyers. The program, dangled as a carrot for top performers, drilled 30 lawyers from all over the company (invitation only) in the GE Way of doing business. Courses taught by a faculty comprised of GE financial gurus and outside business school professors spanned five business days last May and included everything from global economics to risk assessment methods to e-business. “There isn’t a day that goes by in my practice that I don’t use the information and learning from that course,” says attendee Kenneth Resnick, senior counsel-litigation and preventive law at GE Aircraft Engines. LESSON FOUR: TECHNOLOGY IS MORE THAN A TOOL As corporations go, GE was an early adapter, and within GE, the law department was among the first to take its work online. “Digitization” initiatives (GE-speak for the company’s progressive use of technology) have decreased costs by enabling efficient information-sharing capabilities companywide. On the department intranet, which was revamped and re-rolled out in February 2000, lawyers now can find everything from lists of preferred providers, to standard corporate forms, to rosters of in-house specialists around the world, to lists of negotiated discounts that outside firms have accepted. It’s a finely tuned, robust portal outfitted with a carefully selected search engine that has, according to Hawkins, all but eliminated the importance of law books and paper files. “The beauty of this is that you have access to everything,” she says. “That’s what you need, because all of GE is this way now. That’s how the whole world is now.” Perhaps more important, the lawyers themselves are expected to feed the internal “knowledge bank” on an ongoing basis. About 100 lawyers, or their administrative delegates, are equipped to load documents directly onto the intranet from their desks. As counsel like to say these days, they prefer not to have the same question answered twice. LESSON FIVE: KEEP THE BUDGET FLAT In the past four years, the department has grown from 584 lawyers to its current complement of 775 (the number of GE Capital lawyers alone grew from 243 to 369 during that period). But its combined annual legal spending, excluding GE Capital, has remained relatively steady, growing from $175 million to $200 million from 1997 through 2000. Whatever increases there have been year to year are almost entirely due to the explosive growth of three business divisions: GE Medical, GE Power Systems, and GE Engines. The legal spending at other department sections, such as the practice group heads directly managed by Heineman, have remained absolutely flat. The major exception to this analysis is GE Capital, which alone accounts for substantially more than half of the $20 billion in GE deals done each year, and relies heavily on outside firms. But those costs can be capitalized. Heineman says that all of GE’s businesses fall below the national median for legal costs as a percentage of annual revenue, according to the most recent PricewaterhouseCoopers survey. (Since the survey deals primarily with industrial and manufacturing-type businesses, GE Capital is excluded from the analysis.) There are several ingredients that appear to make this possible. In part because of a successful early dispute resolution program — a Heineman pick-up from a pre-existing program at NBC — extraordinary (that is to say nonrecurring) legal costs have gone down by about 35 percent in the last year. (The parallel number for GE Capital is 25 percent.) The program requires all litigation involving more than $25,000 to be reviewed every three to six months to see if it can be pushed into arbitration, mediation, or settlement. “There are going to be some cases where we have a deep principle, or the other side is being impossible, that we are going to have to go to trial on,” says Heineman. “But you can get rid of an awful lot of these cases if you use this process.” Welch-driven initiatives faithfully applied to GE legal also help keep costs down. Welch is famous for adopting Six Sigma quality management. Heineman has amazed the legal community by bringing it into his department and effectively reducing lawyering into measurable, auditable units of work. Finally, says Heineman, this lesson is inextricably bound up with Lesson One, above. You can help keep the overall legal spending relatively steady by hiring fewer, highly productive people — even if you end up paying them a lot. LESSON SIX: DON’T WEAR A TARGET GE wants to end its litigation quickly and not leave unnecessary hard feelings. Longtime outside counsel John McGeeney of Los Angeles’ Paul, Hastings, Janofsky & Walker credits GE’s legal department with the fact that GE, though a consumer-driven corporation, “has not made itself an enemy of the plaintiffs bar.” This is especially important after a loss. Early on, in 1987, GE paid $128.7 million in patent infringement damages to Fonar Corporation. “We missed the shift in patent litigation from the old club of the patent bar to the much more aggressive plaintiffs bar,” explains Heineman. “We were up against hard-assed litigators [from Robins, Kaplan, Miller & Ciresi], and we got smoked.” Today, Ronald Schutz, the Robins Kaplan lawyer who represented Fonar, can’t name a plaintiffs’ lawyer who has made a living or mission out of taking on GE. “I get lots of offers to sue GE,” he admits. “But I haven’t seen anything worth taking.” Despite its protracted wrangling with the EPA over dredging the Hudson River, GE also has not made enemies out of the EPA lawyers. “We’ve always had a cordial relationship and professional dealings with GE’s lawyers,” attests Douglas Fischer, the regional EPA lawyer handling the case. “We certainly have a job to do, but … there’s no hostility.” LESSON SEVEN: IT’S MORE THAN MONEY Heineman talks about public service and a diverse workforce and tries to follow up with action. “I’m truly a child of the sixties,” Heineman says. “We were all of a generation that was very interested in public service.” In 1999 alone, following a revitalization of GE’s diversity drive headed by the company’s counsel for litigation and legal policy, Elpidio Villarreal, the law department added 18 minority lawyers to its ranks. By last November, the company employed 172 women lawyers (31.8 percent of the legal department’s U.S.-based workforce), and 60 minority lawyers (11.1 percent). These hires left GE nearly up to par (with women) or better than par (with minorities) compared to in-house departments nationwide. Three years ago GE corporate counsel Robert Healing founded the Pro Bono Partnership. Based in the New York metropolitan area, this group helps place in-house lawyers in pro bono projects. More than 30 GE in-house lawyers have provided pro bono counsel to nonprofit companies in the local community. In percentage terms, that’s a meager turnout for a 775-lawyer operation. But it’s a start, and Heineman expects more will follow. In March 2000 the ABA awarded GE its National Public Service Award for its efforts. WHAT WOULD BEN DO? What will Ben do? He can stay as long as he and new CEO Immelt like. One outside lawyer who has done a lot of work for the company says that Heineman has committed to easing Welch’s exit by agreeing to stay for a brief period after Immelt takes over. Insiders say that any transition in the legal department likely will follow the Welch model: a careful screening of internal candidates followed by the designation of a successor who will ease into the new role. Friends say that they are surprised that Heineman has stayed as long as he has. “He certainly doesn’t need the money,” says a colleague. “And he’s got such a wide range of interests. Chances are, he’ll just be there for another year or two.” Heineman won’t confirm specifics. “The only official commitment I’ve made was 13 years ago when I agreed to come on for five years. And,” he notes, “it wound up being a lot longer than that.”
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