Lawyers Hang On at Top Companies

Dot-com gigs may have dried up, and a number of lawyers have scurried back to the relative safety of private firms. But corporate law departments in the San Francisco Bay Area -- particularly at the region's Fortune 1000 companies -- are holding on to hundreds of lawyers they picked up during the tech boom of the late '90s. And even with a tough economy, don't expect the numbers to shift downward any time soon.

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Dot-com gigs may have dried up, and a number of lawyers have scurried back to the relative safety of private firms. But corporate law departments in the San Francisco Bay Area — particularly at the region’s Fortune 1000 companies – are holding on to hundreds of lawyers they picked up during the tech boom of the late ’90s. In fact, five of the 10 largest in-house departments in California are Silicon Valley players — including the state’s biggest corporate legal team, the 300 lawyers at Palo Alto’s Hewlett-Packard Co. And even with a tough economy — particularly in the technology industry — don’t expect the numbers to shift downward any time soon. The sweeping corporate reforms contained in the Sarbanes-Oxley Act of 2002 are keeping in-house counsel in high demand. A poor economy means companies need legal advice on everything from laying off workers to coping with bankrupt vendors. And then there’s simple mathematics. Once a company reaches multibillion-dollar revenues it often finds it cheaper to keep lawyers inside to do routine work. “Most companies prefer to do things in-house and hire outside counsel when they need to,” said Bruce Sewell, Intel’s deputy general counsel. “It’s a financial issue so when companies have enough money to support an in-house group, [hiring lawyers] is the normal thing to do.” Sewell is part of the 196-lawyer team at Intel, the second-largest department in the Bay Area and third biggest at a California-based company behind H-P and the 270 attorneys at The Walt Disney Co. Keeping a big department is critical for a company that filed 2,100 patents last year alone. Though much of the patent work is farmed out to private firms, in-house lawyers keep some for competitive reasons and career development. “It’s great day-to-day training,” Sewell said. “And so they’re not just managing outside relationships, it keeps them sharp.” Martha Africa, managing director of Major, Hagen & Africa, which places in-house counsel, said the economic downturn has caused less downsizing in legal departments than she expected. “The current turbulence some companies are experiencing is going to increase the amount of legal work the law department needs to handle rather than decrease it,” Africa said. “The fact you can’t afford the legal work doesn’t mean it’s going away.” Africa said legal departments can also predict how much their in-house lawyers will cost them each year — no small issue when companies are dealing with falling revenue and uncertainty about sales, stock prices and debt. Financial uncertainty isn’t the only unknown looming, of course. Sarbanes-Oxley has had many corporate lawyers in a state of perpetual panic since the law passed in July 2002. “With Sarbanes-Oxley and the entire corporate governance tidal wave, lawyers are becoming a much more integral part of the internal controls,” said Daniel Cooperman, general counsel of Oracle Corp. “You suddenly have high-level people paying attention to issues of what might be seen as mundane or questions that were way below their grade level,” Cooperman said. “It’s given lawyers much more prominent roles in corporate governance.” Large corporate departments are not only hanging on to their attorneys, they are still spending big bucks on outside counsel. Intel’s Sewell estimates his department spends $75 million each year on outside counsel. Charles James, ChevronTexaco GC, spends more than $100 million annually. Still, James is looking for ways to tighten up his department. He took over as the new GC in December and is working on a host of administrative issues. “We’re working on our mix,” James said. “You look for circumstances where there is a critical mass of work that is recurring and look for ways to provide that in an economic way.” That’s not to say he’s looking to lay off lawyers — in fact, he may hire more. “It’s the scope of business that drives the growth,” James said. “And certainly as our society has become as litigious as it is, it drives growth.” Factors like greater government regulation and litigation are likely to determine how big his department will become. James, for example, is in the process of determining how he will structure and staff a center for environmental law to keep the company covered on issues stemming from oil exploration and refining. “Environmental law and compliance is a big-ticket item,” James said. “We absolutely have to have the best in-house legal resources.” Africa said much of the growth in in-house departments has been quiet. Companies need lawyers, but they don’t necessarily like to think about it. “These places with large squads of lawyers don’t make big announcements when they’ve grown by 50 percent,” Africa said. “The company would get angry.” And “when you think about it, the company’s products are not lawyers,” Africa said. “Why should it brag about how many lawyers it has?”

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