Survey: Increased Scrutiny Of Companies Has Minimal Impact On CLO Satisfaction

Thursday, May 1, 2008 - 00:00

According to the results of the Association of Corporate Counsel's (ACC) 8th Annual Chief Legal Officer Survey, 85 percent of chief legal officers found their careers to be rewarding and "welcomed opportunities to expand their roles and the support they provided to their clients."

In spite of the increased scrutiny companies have been under and shifts in responsibilities resulting from governance reforms, only 30 percent revealed that these factors played a role in future decision-making, while 59 percent indicated that the increased scrutiny had a small influence on their overall career satisfaction, noting a "healthy appetite for risk."

In late October/early November 2007, ACC invited 5,355 of its U.S. members holding the title of chief legal officer (CLO) or general counsel (GC) to participate in the 8th Annual Chief Legal Officer Survey. The survey was open for a period of three weeks and 1,166 responses were received. ACC has conducted the Chief Legal Officer Survey annually in conjunction with its Annual Meeting since 2000.

To provide benchmarks for further analysis, this year's survey addressed a number of issues that were covered in previous years' surveys, including the relationship with outside auditors, outside counsel spending, company revenue, intentions to expand the legal staff, and the type of legal work that would demand most of general counsel's time and resources. The findings from the 2007 survey tracked closely to the 2006 results, and where there were variances, they were not startling.

When asked how they would characterize their relationship with outside auditors over the past few years, a fraction of this year's respondents indicated that there was a slight improvement in the relationship with their outside auditors (16 percent), some said it had been difficult (25 percent), but most indicated that the relationship remained unchanged (59 percent).

"For auditors, the survey results can prove to be an effective tool for strengthening the relationships with their corporate clients," explained Frederick J. Krebs, ACC president. "The reasons cited by some general counsel who indicated that the relationship had become more adversarial, had less to do with concerns about the competencies or objectives of the auditors, but were more likely attributed to perceptions about the respective roles and boundaries."

In light of the rise in corporate misconduct and failures, which has spawned a wide array of complex laws, new regulations, and revised standards governing corporate audits, Krebs notes that ACC recognizes that cooperation between company lawyers and auditors can help both to achieve the goal of properly fulfilling their professional obligations. To improve and strengthen their working relationship, ACC has invited auditors and in-house counsel facing challenges to work towards the adoption of concrete measures.

"It is not surprising that perception, or in this case, misperception, about respective roles and boundaries is a factor attached to difficulties in the auditor/in-house counsel relationship." Mr. Krebs says. "Compliance with the collections of rules and regulations is a shared goal for those at the front lines of the audit process. Although employed or engaged by the same company, and sharing a common interest in appropriate financial disclosure as required by securities laws, outside auditors and in-house lawyers bring different perspectives to their roles and each must meet different legal and regulatory requirements that apply to their respective missions in the audit process. ACC is working hard to help bridge that gap between the two."

The survey results also found that CLOs and general counsel continue to spend the majority of their time on corporate transactional work (70 percent), followed by compliance (28 percent) and board relations (21 percent). While compliance, governance and e-discovery are hot topics, survey respondents indicated that records management would be the next significant issue that general counsel would tackle in 2008, followed closely by staff recruiting, retention and training.

This year's responses indicated a slight increase in outside counsel budgets, along with an increase in the total average annual budget. Notably, there was a wide-range of law department budgets and outside counsel spending. For example, some respondents indicated that their average total law department budget was $50,000 and that their outside counsel budget was around $10,000 annually. On the other end of the budget spectrum, one respondent indicated that the outside counsel budget was $500 million, with a total law department budget of $750 million annually.

When asked what initiatives outside counsel could implement to improve the relationship with their legal department, respondents ranked alternative billing/flexible billing/e-billing as the best initiative, followed closely by offering seminars, training and CLE sessions and providing updates on developments in applicable areas of law. Conversely, in 2006, seminars/ training/CLE was ranked highest, while alternative billing options ranked third.