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The names of Lyondell Chemical Co.’s products sure don’t roll off the tongue. The Houston-based public company is one of the world’s largest producers of propylene oxide, toluene diisocyanate, propylene glycol and styrene monomers. Through its ownership interest in Lyondell-Citgo Refining, Lyondell is one of the largest refiners in the country, processing extra-heavy Venezuelan crude oil into gasoline, low-sulfur diesel and jet fuel. Through ownership interests in Equistar Chemicals, Lyondell also is one of the largest producers of ethylene, propylene and polyethylene in North America and a leading producer of polypropylene, ethylene oxide, ethylene glycol and specialty polymers. Lyondell and its joint ventures, Equistar Chemicals and Lyondell-Citgo Refining, collectively employ about 7,700 people worldwide. But Lyondell’s products are incorporated in a vast array of everyday items ranging from garbage bags, cereal box liners, pet food additives and ingredients in cosmetics and skin care products, to additives incorporated into gasoline for cleaner-burning fuels, components in home insulation materials, polyester fibers in clothing and bedding, and the foam cups filled with morning coffee. Dan F. Smith, Lyondell’s president and chief executive officer, says that given an increasingly complex business environment and an array of government regulations and legislation relating to the chemical industry, the greatest challenge the company faces is growing its earnings and cash flow. “We need to gain greater control over our destiny,” Smith says, “and that means we should be larger, more global, with a broader and deeper product line. We need to grow cash flow so that we can continue to grow and expand.” Smith sees the company growing through a combination of mergers and acquisitions, internal growth and partnering, and strengthening its balance sheet by further reducing debt. Thus, in July, Lyondell closed concurrent offerings of 8.28 million shares of common stock at $14 per share and a $278 million debt offering. It also amended its secured term loan and revolving credit facilities as part of a financing plan. In August, Lyondell shareholders approved the creation of a new Series B common stock and sale of the new shares and other securities to a subsidiary of Occidental Petroleum Corp. Lyondell used cash proceeds from the sale of these securities to purchase Occidental’s 29.5 percent interest in Equistar Chemicals, bringing the company’s interest in Equistar to 70.5 percent. Such transactions have kept the in-house lawyers plenty busy. Smith and Lyondell’s general counsel, Kerry A. Galvin, recently took time to describe their legal department and their working relationship to Texas Lawyer reporter Erica Lehrer Goldman. The discussion follows, edited for length and style: Texas Lawyer: What qualities do you find essential for a general counsel of a company like yours? Dan Smith, president and CEO, Lyondell Chemical Co.: Certainly a high degree of competency in corporate law. But more than that, a sound understanding of business in general and, in particular, our business drivers. Perhaps most important is a high degree of integrity and objectivity. Since our general counsel doesn’t have a specific aspect of our business to manage, she brings a certain degree of detachment to the discussions that lead to business decisions. This independent perspective is critical to making the right decisions for the company overall — she serves as kind of a sober second thought for the company. Other than that, a good team player, a leader who can motivate the legal team and a highly energetic person who can handle multiple projects simultaneously. TL: What were you looking for in terms of background? Smith: First and foremost, knowledge of our company and the businesses in which we operate, as well as a good political sense of how to get things done in a corporate setting. Most important, however, someone with the courage to take on issues and challenge management if necessary. TL: How large a legal staff does the company have? Kerry Galvin, general counsel, Lyondell Chemical Co.: There are approximately 50 employees, worldwide, including 25 lawyers. The majority of them are in Houston, the remainder are in Cincinnati; Philadelphia; Maidenhead, England; and Rotterdam, The Netherlands. … We employ specialists in intellectual property law, corporate finance, securities law, employee benefits, labor and employment, environmental, litigation, antitrust, pipeline and real property. Many of our lawyers, including the international lawyers, practice in the areas of commercial law, including sales and marketing and the various areas of manufacturing, including logistics, supply chain and materials management. The experience levels vary from “lawyers in training” (patent agents who are attending law school), to lawyers with 25 to 30 years of experience. The biggest concentration of our lawyers are those with 10 to 15 years of experience and 25 to 30 years of experience. TL: Did you hire the other members of your staff? Galvin: We have hired four lawyers in the department since I became general counsel, but most of the lawyers, including my direct reports, were here when I became GC in 2000. TL: How do you attract and motivate your legal staff? Smith: We try to create an environment that is an exciting and a challenging place to work. I think part of that is proactively involving the legal staff in overall business decisions affecting the company. We also offer a competitive compensation and benefits package. And we are open and honest in our communications with people so they can contribute to their full potential. TL: How much autonomy does your GC have? Smith: I believe it is essential that the GC have the responsibility and authority to influence or change decisions. By design, our GC has complete and open access to our board of directors as well as any executive or manager throughout our company. I consider this a very important part of her job. It goes without saying that she has complete responsibility for directing the activities of our legal department. TL: What role does the general counsel play in business decisions? Smith: As I have said, as a key member of the executive leadership team, our general counsel is involved in every major business decision and certainly has a key role in every business deal. Her office is right next to mine, and I rely on her advice every day. In addition, I expect other executives to review key decisions with the general counsel before they are finalized. TL: What is your weekly interaction with the legal department, on average? Smith: I am routinely briefed on key issues by other members of the legal staff. However, most of the day-to-day interaction with members of the legal department is handled by the GC. One of our GC’s responsibilities is communicating with the legal department and keeping the legal team aligned with our overall goals. THE COMPANY’S CONSCIENCE TL: What kinds of issues have you had to handle? Galvin: I can think of very few issues that I have not had to address. We have and are currently addressing significant matters regarding corporate governance, litigation, dealings with joint venture partners, major financial and business transactions, as well as legislative and regulatory issues. As a member of the executive team, I deal with budget and strategic planning initiatives, company philosophy and cultural issues, as well as corporate and organization design issues. TL: Given all that you do, how much autonomy do you feel that you have? Galvin: In legal matters, I have complete autonomy. In other words, if I feel that a legal matter is not being given proper consideration or attention, I have absolute ability to raise that issue to whatever level I feel is necessary, including the board of directors. I do think the legal department plays a unique role in acting as the company’s conscience. I don’t mean to overstate that — obviously, Lyondell is full of conscientious people, but it is our responsibility to provide objective advice and ethical perspective on many issues. On the other hand, in terms of developing the company’s legal strategies and allocating resources, et cetera, I am constantly mindful of the company’s overall objectives and business drives. TL: What did you do prior to joining the company as GC? Galvin: I had been with the company for 10 years preceding my promotion to general counsel. Immediately preceding my promotion, I was associate general counsel with responsibility for international legal matters, based in our offices in Maidenhead. I started with Lyondell as the corporate and securities counsel. Prior to that, I was in private practice in Houston. TL: What in particular made moving in-house an attractive choice for you? Galvin: Although I was not looking for such an opportunity, it originally appealed to me as an opportunity to be part of the legal department of a newly public company that was seeking to grow. I was extremely fortunate to land at a company that has always considered the legal department to be one that adds value and is part of the business team and decision-making process. I think, for a young lawyer, part of the attraction of coming in-house is the job satisfaction that comes from a deeper understanding of and commitment to your client’s business objective. TL: What is the best thing about your job? Galvin: It is constantly challenging and interesting. I still feel that I have a lot to learn about management, as well as the law, and I cannot imagine the day when I feel that I have accomplished that. However, by far the best thing about this job is the people with whom I work. We have an outstanding legal department comprised of energetic people highly committed to the company’s success. In addition, I derive a great deal of pleasure from working with the other members of the officer team and the other company leaders that I interact with on a regular basis. TL: What are your short-term and long-term goals with regard to your legal department? Galvin: Short-term goals include continuing to improve the internal communication and processes within the legal department so as to better leverage the resources within this talented, yet geographically diverse group, to improve efficiency and timeliness of delivery of legal resources. My long-term goals include continued focus on job development, organization design and better use of technology so we can create an even more flexible, creative department that can support the company’s growth objectives.

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