ACC Update - June 29, 2005 (Plain Text Version)

Welcome to ACC Executive Bulletin

Welcome to the first issue of the ACC Executive Bulletin, developed specifically for our members who are Chief Legal Officers and General Counsel. This newsletter will be sent quarterly and include information, insights, and resources just for leaders of in-house law departments.

Hot Topic: The Changing Relationship Between In-house Lawyers and External Auditors

The ACC board recently engaged in discussion about how the relationship between in-house lawyers and company auditors is changing in the wake of increased regulatory requirements and scrutiny. Some of the key points that were discussed included:

• While everyone agreed that the relationship has changed, there was not consensus on whether or not this has been a positive development. Some members found it to be a more “extensive, complete” relationship, but others were concerned about rising costs and the fact that auditors did not always seem to recognize their role in helping the company succeed.
• Opinions on the importance and helpfulness of attorney-client privilege in the audit context also varied. While some members felt that much of the information discussed in the audit context was protected, others did not count on anything being protected.
• At the same time several members expressed concern that company management readily disclose everything to auditors without considering the long-term ramifications of these actions. The immediacy of the need to get through an audit successfully seems to trump seemingly vague and unlikely threats down the road, despite the strong objections of their in-house counsel.
• One member described the engagement letter from auditors as the most one-sided document that a company ever signs, while recognizing that the company has no choice: they must be audited.
• Board members also discussed the role of the company finance staff in the audit process. While some saw the legal staff serving as a mediator between two adversaries (finance staff and external auditors), others found themselves serving as a stop-gap to keep finance staff from releasing too much information to auditors.

It is obvious that there are no easy answers for how to handle this increasingly complex relationship and it may vary greatly from company to company. Here are resources that can help you determine what will work best in your company:

• Responding to Auditor's Requests
• Tools You Can Use: Helping The Audit Committee Manage Its Relationship With
The Outside Auditor

Additional resources are available in the ACC Vitural Library.
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In-house Insights: Andrea Zopp, Sears Roebuck and Co. on Law Departments Adding Value

The law department at Sears, Roebuck and Co. is implementing practices to provide company business leaders with enhanced “line-of-sight” into legal costs and risks, and the benefits of engaging in this up-front dialogue are many. “The Legal Business Reviews have helped the business get a clearer view of their legal matters, and are viewed as adding value and providing information on what lies ahead. The overall process also tends to engender conversation around legal matters and developments generally, which leads to efficiencies in providing legal services and better business solutions,” explains Andrea Zopp, Senior Vice President & General Counsel for the company.

WHAT IS A LEGAL BUSINESS REVIEW?
The Legal Business Review is a sit-down session with law department representatives, business leaders, and Ms. Zopp to discuss and help analyze information on legal costs, legal risks, and opportunities for improvement for a given business unit. During the meeting, law department representatives provide business leaders with a report for discussion summarizing information on: forecasts and summaries of legal costs; possible cost drivers such as highlights of key litigation matters and business transactions; and an analysis of legal risks and a proposed action plan to address them. Rolled out in 2004 and initially performed quarterly, the Legal Business Reviews are now conducted semi-annually, and are generally an hour long.

Zopp shares that a primary objective of the Legal Business Review is to drive behaviors. “For some business units, legal costs are a significant cost item, and understanding how behaviors impact those costs is helpful. To the extent that behaviors may increase the company’s risk profile and there are other ways to achieve business results, information from these reviews can help drive changes,” explains Zopp.

FEEDBACK ON LEGAL SERVICES IS PART OF THE PROCESS
As part of the overall process, business leaders complete an evaluation form to provide feedback on legal services. The evaluation process gives the law department feedback on the usefulness of the review content and also of the discussion of legal issues during the review. “This helps us ensure that the information we provide is relevant and has an impact,” Zopp said.

ENGAGING CLIENTS AS BUSINESS PEOPLE AND SHARING OBJECTIVES ADDS VALUE
“Speed is important in the retail business. The Legal Business Review process has helped business leaders to recognize that getting lawyers engaged earlier is more efficient and cost-effective. Prior to conducting these reviews, some business leaders saw the law department primarily as a cost item and a checkpoint. The Business Legal Reviews have helped clients see that company lawyers can engage them as business people and share in objectives to bring value to the business and improve results,” says Zopp.

Information for this CLO Highlight was taken from an interview with Andrea Zopp included in ACC’s Leading Practice Profile titled “ Leading Practices in Law Departments: Adding Value and Moving Beyond the Cost Center Mode.”

* Andrea L. Zopp was named Senior Vice President and General Counsel of Sears, Roebuck and Co. in July 2003. In this position she has responsibility for legal affairs, public relations, and compliance.
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Networking: ACC’s CLO Club

A sell-out every year at ACC’s Annual Meeting (October 17-19, Washington, DC), the CLO Club is an exclusive, facilitated networking forum that promotes peer-to-peer discussion groups targeted to the unique practice, management and networking needs of chief legal officers. This year’s CLO Club will cover a range of issues, including corporate ethics and compliance management. Learn more about the CLO Club and register for ACC’s 2005 Annual Meeting. [return to top]

For the Bottom Line: Inhouse Jobline

Do you need to add staff to your in-house law department? Make ACC’s Inhouse Jobline—with more than 700 positions and 5,500 resumes—your first stop. Easily manage your job postings through Inhouse Jobline’s interactive database and search the thousands of resumes. Plus, you can take advantage of the ACC membership discount, making this both an efficient and cost-effective tool. Check out ACC’s Inhouse Jobline. [return to top]