GE's General Counsel: A Class Act With "A Players"

Tuesday, July 1, 2008 - 01:00
GE

Editor: Describe the process that led to your selection as general counsel.

Denniston: You'll have to ask Ben. My part in it was he called me up one day in January 2004 and said, "Come on down to my office." When I got there, he told me "I'm retiring as general counsel although I will be keeping my responsibilities for government relations for a few years - and congratulations. You are the new general counsel. When Jeff calls you be sure to act surprised." A little later that day, I got a call from Jeff Immelt and he told me the great news officially. So I wasn't very much involved in the process. I had worked at that point about seven and a half years at GE and I guess everyone involved in my selection knew me pretty well. I was completely surprised. Pleasantly so, of course.

Editor: What is your role at GE?

Denniston: GE's legal organization includes about 1300 lawyers. Of that group, a very much smaller number reports directly to me. I have significant responsibilities for the following functional areas: government relations; international law; environmental, health and safety; compliance and corporate governance. My part of the legal organization includes, in addition to the chief securities lawyer, whose focus is corporate governance as well as securities, and the chief environmental, health and safety lawyer, a relatively small staff of very senior, very able functional lawyers in Fairfield and other places who specialize in key functional areas. My responsibilities also include the government relations organization in Washington and the international law and policy organization, which, although based in Washington, has a global reach. In addition, my job includes the compliance organization, which is also global and has hundreds of professionals working with our lawyers.

Editor: What are your relationships with the CEO, other members of the executive leadership and the board?

Denniston: Close. I interface on almost a daily basis with Jeff, Keith Sherin, our Vice Chairman and Chief Financial Officer, John Rice and Mike Neal, who are Vice Chairs, John Lynch, who is the head of HR, and other GE business and functional leaders. One of my corporate governance responsibilities is focusing on the role of the board. I and these other GE leaders spend a great deal of time thinking about matters relating to the board. We also spend a lot of time with the board and the board committees. I am the corporate secretary, and in that capacity attend every board meeting.

I attend most committee meetings, except that I don't attempt regularly to attend the Management Development Committee, which John Lynch regularly attends.

Editor: Tell us a little more about your participation in top management decision making.

Denniston: The way GE is organized is not all that different from many companies, although our scope may be broader than most. The interface on decision making is with the senior leadership of the company, so I spend considerable time with the CEO and the other key executives whom I mentioned earlier, whether it's on the telephone or via e-mail or in meetings of various kinds.

I am also a member of our Corporate Executive Council which includes about 40 of the top leaders of the company, and it meets each quarter for about a day and a half.

GE also has a number of business management processes which are well known. We have a business planning and strategy session called Growth Playbook, which is a get-together where Jeff and the rest of the senior leadership sit down with the leaders of all the businesses to talk about business strategy within the time frame of the next three years. We have a similar but somewhat different process called "Session II," which is held late in each year and primarily focuses on the business planning process for the next year. We also have "Session C," a comprehensive review of people each spring.

We have "Session D," which includes compliance reviews of each of the GE businesses presided over by a body called the Policy Compliance Review Board, which I chair and which the CFO, the Senior Vice President for HR and the head of the audit staff sit on. The Policy Compliance Review Board is the senior compliance policy-making body of the company that regularly meets with the individual businesses and their legal staffs. The same group also attends meetings of the Risk Committee. In short there are many corporate processes for interfacing and managing the business of the company in which I participate.

Editor: How do you stay on top of the vast amount of information that you need to know that may not come to your attention through the processes you mentioned?

Denniston: Each of the businesses has a general counsel who reports on a dotted line to me. Many of these general counsel have their own functional organizations depending to some extent on the size and complexity of the business. I meet quarterly with the senior lawyers, so that's another way that we get information. But I have many informal ways to gather information, sometimes connected to those business processes that I've mentioned, and sometimes completely independent of them.

As with anyone who heads a function, I visit various parts of the business - so I went to Asia last week and met with the Asian lawyers, or many of them, in Hanoi, Vietnam. I go to Europe at the end of June where I will see many of the European lawyers. I get insights into many of the businesses when we go through our Session C personnel review and planning session. So, I get a lot of touch time with the lawyers and business people, and it's important touch time, because you are not just learning about what the issues might be, but you're learning about people - because at least one-third of this job is people.

Editor: Your role and that of your immediate staff in policy formation is of great importance. What are the keys to successfully carrying out this mission?

Denniston: The first and most important key to sound policy formation is quality people - you need "A Players," which is the way Ben characterized it when he talked with us and the term he used in the book. You need the best people you can get. It is increasingly important in a global company. Over 50 percent of our revenues are now global. In order to replicate globally what was once essentially a U.S.-oriented organization, you have to have the same high standards everywhere. Part of being a great lawyer is your ability to anticipate events and your comfort with policy. That's what good lawyering is all about in this age of more regulation, more complexity and global practice.

My staff includes experts who are domain experts; for example, Ann Klee is responsible for environmental, health and safety. Ann was General Counsel of EPA, she was a senior staffer in the Senate, she's got a background in environmental law and she's a lawyer as well. She combines legal skills and a lot of policy too. She is an expert in a particular area that requires not only regulatory and legislative skills, but also legal and operational expertise. For us, environmental, health and safety is very much operational.

We also have government relations experts that have substantive expertise in the areas that they cover. For example, we have people in Washington with backgrounds in health care who spend their time on health care issues. I don't think it's as important to have lawyers in those positions as having people who are comfortable with the world of policy and the external world. GE has long had the capability to indentify good people, but finding them across the globe is sometimes challenging. In the late '80s we were at 400 lawyers. We're at 1,300 now - and they are in lots of different places. We had only a handful of Asian lawyers in the late '80s, so we have had to add lawyers as Asia grew in importance for us while insisting on getting the best people.

Editor: How does GE manage to stay out of the kinds of trouble in which some of your global competitors like Siemens find themselves?

Denniston: That goes to having strong compliance processes - and taking them seriously. For us it's extremely important that compliance not be just a pretty book, because some of those companies that had the worst cultures had the best books. Like Enron, Siemens had a pretty book, but the pretty book doesn't mean much unless you have the culture of compliance and integrity. That takes people, it takes leadership, it takes good reactions, good responses and above all it takes a set of processes and the organizational and business skills to implement them.

Ben's book talks about three legs of a successful compliance program - namely prevention, detection and response. We have developed and applied in an uncompromising way a set of leadership principles that involve culture building, strong training, strong policies, strong checks and balances, a great audit staff; and we have demonstrated and made known our willingness to discipline people who stray from the rules. In addition you've got to have sufficient knowledge and strength in key locations to be able to apply those principles. So, in China, for example, we have world-class people to help implement world-class processes. That's how we try to stay out of trouble. Although we take into account local culture, we include checks and balances designed to assure that there is no deviation from the corporate goal of fusing integrity with high performance.

Now, having said this, we know we are far from perfect - and certainly have our own issues - which we try to learn from.

Editor: Ben sees good citizenship as something that pays dividends, real dividends over time on a cost-benefit basis.

Denniston: Our view is that good citizenship is about operating in a highly ethical as well as lawful way. That sort of behavior is in the best interests of the company, its shareholders, the people who work for the company and other stakeholders. What Ben is really saying is there's a confluence of self-interest and citizenship.

Sometimes there may be a more immediate and tangible payback to GE for its good citizenship efforts as with its support for CPR and its efforts to convince more companies to use ADR to resolve disputes. CPR's effort to spread the word about ADR not only benefits all companies by reducing litigation costs, bringing about more rapid resolution of disputes and preserving valuable commercial relationships, it also redounds to the benefit of GE by increasing the universe of companies committed to considering the ADR option in the context of early case assessment. Similarly, while GE's support for efforts of Transparency International to criminalize bribery benefits all companies committed to refraining from bribery, it also benefits GE because it builds the base of support for anticorruption measures.

Other good citizenship efforts have less tangible returns but are of great benefit from a reputational standpoint. A good example is our support for the Pro Bono Partnership, which included asking Bob Healing, one of our senior labor and employment lawyers, to help create and then build it as a vehicle for expanding pro bono opportunities for in-house counsel in areas surrounding New York City. That was a huge and important step, and another senior labor and employment lawyer and our current pro bono leader, Mark Nordstrom, has carried on that great work. We have asked every one of our businesses to have a pro bono leader, and they have assigned senior people to spend significant time on it.

Another activity with a tremendous reputational payback is GE's policy of assisting areas affected by disasters. Our response to the Chinese earthquake is illustrative. Jeff Immelt very quickly said we need to respond - and the company made a very significant donation. Jeff was asked by President Bush to sit on a committee of senior business leaders to help raise additional funds for the earthquake victims.

A reputation for good citizenship can be built only by letting people know about it. Each year we publish a citizenship report detailing our citizenship initiatives. Although I helped, Bob Corcoran who heads GE's Corporate Citizenship efforts deserves the credit.