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At Southwest Airlines, Chairman Herb Kelleher made the ultimate demand of his GC, asking the attorney to succeed him. While that’s a lot to ask, it raises the question for other companies: What do CEOs want from their general counsel? A recent study by the American Corporate Counsel Association ranked the major characteristics CEOs look for in their in-house lawyers. The top five: trustworthiness, maintaining confidentiality, providing accurate feedback, responding in a timely manner and understanding company business. Corporate Counsel asked a handful of CEOs and general counsel from a variety of companies to see if that jibed with their experiences. It did, in spades, but other qualities also made their top 10 lists. FASHIONING A PARTNERSHIP When Coach Inc. general counsel Carole Sadler decided to leave law firm life and go in-house, someone told her to “look for a company where you have the ear of the CEO.” At fashion accessories icon Coach, she has the full attention of CEO Lew Frankfort. Frankfort, who came to the New York-based company in 1979 and has been CEO of Coach since 1995, makes it clear that when he hired Sadler in 1997, he was looking for a real partner. Sadler, 42, became division counsel at Sara Lee Corp. in charge of Coach at a time when the mother company wanted to spin off the fashion division. “Carole’s street-smart. She delicately navigated the passages between her Coach general counsel role and [her] Sara Lee division counsel role,” says Frankfort, 55. She was vital, he says, in negotiating the complicated separation agreement with Sara Lee, and in Coach’s IPO preparation. The division went public in October 2000, just as the market downturn was rendering many IPOs dead on arrival. Coach not only survived that negative environment, it also weathered the post-Sept. 11 retail crisis fairly well. Sales for the last three months of 2001 rose 12 percent over the same quarter in 2000. Frankfort expects a 12 percent rise in sales to $675 million in fiscal year 2002 — despite the recession. Analysts attribute that success in part to a recent image makeover. Out went Coach’s stodgy, wood-paneled stores and predictable product line. In came gleaming white showrooms and hipper styles. To help the company grow, Sadler says she had to think like a businessperson. “You have to let your company know that you know the business of the business is not lawyering,” says Sadler, who has only one lawyer on staff. “My job is to be a facilitator. It takes flexibility and nimbleness of mind — being able to do 15,000 things at the same time.” Frankfort says he sees that ability on display even with just a glance into her office. “We need someone who can juggle many things at once,” he says. “She works right down the hall from me, and I’ll walk by and see a team of lawyers from Japan in her office to negotiate a lease while she’s on the phone dealing with something completely different.” TURNING IT AROUND In midsize companies like Coach, says Fred Krebs, president of ACCA, general counsel “often play pivotal business roles … [and] … it really helps if they get along well with the CEO.” That sense of trust is particularly important when a GC and CEO haven’t worked together for very long. That’s the case at Spherion Corp. The world’s largest temporary worker business is facing a crisis that threatens to be more than temporary. The Fort Lauderdale, Fla.-based firm, with $3.5 billion in annual revenue, was on a buying spree for years, snapping up dozens of companies. But revenues eroded over the last few quarters as companies cut back on their hiring of temporary workers. Cinda Hallman, 56, came from being the senior V.P. of global systems and processes at E.I. du Pont de Nemours and Co. last April to become Spherion’s CEO. (She’s one of just five female CEOs of a Fortune 500 company.) Hallman says she counted on her general counsel, six-year Spherion veteran Lisa Iglesias, to help get her up to speed. Hallman is redirecting the company toward its core strengths of outsourcing and recruiting. “A general counsel has to have an integral understanding of the business and has to work with the CEO in terms of understanding what the company’s risks are,” says Hallman. “I want our GC to keep an eye open to what we might need to prepare for, or mitigate a year or two down the road.” That includes, she says, tracking legislation and personnel issues. Hallman speaks with Iglesias at least several times a week, and sometimes every day. The CEO likes conversations with Iglesias, 36, to be straight up and light on lawyerese. “At an external law firm lawyers are careful,” says Hallman. “I want our GC to be less stilted and off the record and not talk like a lawyer all the time. I also want her to get to the point where she’s a confidante on some issues. Not all, but some. It’s a matter of building trust and developing it.” BOOSTING THE BOTTOM LINE At most big traditional companies the CEO and GC do not spend a lot of time talking, management consultants say. So in-house lawyers need to make an impression some other way. When William Lytton became GC of International Paper Co. in 1996, he says, he thought it was crucial to get to know CEO John Dillon “in a nonbusiness setting.” So he requested, and had, a lot of dinners with Dillon. Now that Lytton has been on the job for a few years, though, their interaction is more limited. “When the CEO is running a corporation of global reach,” Lytton says, “it’s unrealistic to think that the GC is going to be the equivalent of an executive assistant to the CEO — and he shouldn’t be. I don’t measure my importance or the impact I have by face time with the CEO.” How’s a GC then to make an impression? Lytton, head of ACCA, does it, in part, by helping IP’s bottom line. He applied the Six Sigma cost-cutting philosophy to his 50-member legal department. He created a department intranet site, a contract forms database and a legal desk reference for company managers, and began engaging in as much preventive lawyering and training as possible. The result: In 2000, Lytton says, the legal department “created,” through these and other cost-saving measures, $70 million for the company. Peter Zeughauser, president of the Newport Beach, Calif., consulting firm Client Focus, says that efficiency is vital to CEO-GC communication in big companies, where everyone’s time is tight. What CEOs really want, he adds, “is a can-do attitude from their general counsel.” TALK IS NOT CHEAP When the GC reports to the CEO, the reporting structure is clear. But below those ranks, senior executives often work with attorneys who don’t report to them. As president of Discovery Communication Inc.’s consumer products division, Michela English, 52, is used to working in this kind of organization. Her main lawyer, Tia Cudahy, 38, is one of Discovery’s four deputy GCs. The in-house attorney doesn’t report to English, but to the company’s overall GC, Mark Hollinger. Four junior lawyers aid Cudahy in helping English, but they also work with other divisions. The Bethesda, Md., company is growing fast, capitalizing on its ever-more-popular Discovery Channel. Revenue last year hit $1.7 billion, with English’s division — one of three — generating $300 million of that. Her unit has 65 retail stores selling science- and nature-based toys, games and educational materials and will be opening more soon. English says the pressure to perform well within the company makes it critical for her division lawyers to know exactly how her piece of the business works — and what she wants to do. She meets with Cudahy at least once a week and with one of Cudahy’s deputies several times a week. Cudahy says that the key to making this reporting structure work is not just communication with the client, “but a lot of communication among the lawyers.” “We’re lucky here that the lawyers are brought in on business decisions in the very early stages,” says Cudahy. “When the business people are considering a new arrangement with a toy licensee, for example, they know it’s a good idea to get our input before getting any written word out the door.” English says she’s learned over time that the counsel’s understanding of business plans is vital.” That’s why, she recalls, “we recently held a meeting to announce our budget plan, and we had all the lawyers there just to understand exactly what we were doing.” THE GRASS IS GREENER … ON BOTH SIDES Few people bring the kind of perspective to the GC-boss relationship that Jeffrey Kindler does. The attorney, 46, was general counsel at McDonald’s Corp. from 1995 until last spring, and during some of that tenure he also served as CEO of the company’s Boston Market chain. Last May, Kindler jumped entirely to the business side, as president of McDonald’s alternate brands (such as the Donatos Pizza and Boston Market). But in January 2002 he became a practicing lawyer again — this time as general counsel at Pfizer Inc., the New York-based pharmaceutical giant. Kindler says his brief turns at the helm will make him even more effective as a counselor to Pfizer CEO Henry McKinnell. “As GC at McDonald’s my job was to prevent legal problems and advance business goals,” says Kindler. “That becomes more real and more powerful to you when you’re a client. I hope it will have made me more responsive.” Kindler says he became GC at Pfizer, one of the world’s top five drugmakers, in part because legal issues spawned by constantly evolving science and government regulation are at the heart of the business. That, he says, distinguishes the new GC post — and relationship with the CEO — from his last job. But, Kindler says, two things are constant no matter which industry a GC joins: “You have to try to achieve a very strong understanding of the business. And you have to develop a strong relationship, not just with the CEO, but with all your clients. You have to earn everyone’s confidence.”

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