Backstory: Rebel with a Cause A talk with Ben W. Heineman, Jr.

Tuesday, June 14, 2016 - 20:28

For Ben W. Heineman, Jr., the heart of the matter is tension.

In his nearly 20 years as the top legal executive at General Electric, Heineman redefined the role of the GC in the modern corporation. The key to a GC’s success, he says in his indispensable new book, “The Inside Counsel Revolution,” turns on her ability to resolve the tension inherent in the dual roles of partner to business leaders in the drive to achieve performance goals and guardian of the corporation’s integrity. 

That’s no easy trick given the “Herculean” task the typical GC faces. Indeed, as Heineman marches readers through a parade of corporate horrors – Enron, WorldCom, HP, Siemens, Wal-Mart, GM – he’s compelled to conclude that inside counsel, too eager to please their business partners, have “failed miserably as guardians.” He does not, however, abandon hope, citing “the many voices maintaining that a strong guardian role for the General Counsel is both desirable and feasible.” 

There is no shortage of doubters. They survey the wreckage littering the corporate landscape and conclude that reconciling the partner-guardian roles can’t be done. Securities law maven John C. Coffee, Jr., a professor at Columbia Law School, is a prominent example. Coffee believes inside lawyers are fatally compromised by the very nature of their roles. In his book, “Gatekeepers: The Role of the Professions,”
he poses the obvious question: Why do so many corporate gatekeepers, including inside counsel, fail?
He answers his question with a question.

“Put simply,” he writes, “the real question is whether one can trust a watchdog hired and paid by the party to be watched.”

The answer is no, Coffee says. Not so fast, counters Heineman, who is no Pollyanna. He fully recognizes the difficulty of the path. In the wrong circumstances at the wrong company with the wrong CEO, the path can lead to a tunnel with no light at the end.

Still, Heineman’s is a brighter vision. His prescriptive approach is infused with a healthy optimism about the profession, where the legal grass is definitely greener inside the corporate fence. That’s because things have come a long way since the days when inside counsel were looked upon with derision – even pity – as lawyers who washed out at the big firms. Thanks in no small part to Heineman, the in-house backwater is now the wave of the future in modern practice. And it can be an exhilarating, enlivening, fulfilling professional ride.

“I do not believe that the choice for general counsel and inside lawyers is to go native as a yea-sayer for the business side and be legally or ethically compromised, or to be an inveterate naysayer excluded from key discussions and decisions and from other core corporate activity,” he writes. “Indeed, I think being both an effective partner of business leaders and respected guardian of the corporation is critical to the performance of each role. I deeply believe that this fusion is possible.”

Heineman calls his book “my last will and testament on the role of General Counsel in the high performance with high integrity corporation.” It’s impossible to do it justice in a short review. “The Inside Counsel Revolution” pulls together skeins of string he has gathered over the years – speeches, articles and broad experience in private practice (WilmerHale, Sidley, Williams & Connolly), academia (Harvard, Yale), government (Department of Health, Education & Welfare), the Supreme Court (clerk for Potter Stewart), and, of course, at GE (Senior Vice President and General Counsel) – and weaves it into a comprehensive and coherent framework for the GC role – and the role of lawyers generally. The key is asking not only the first question, “Is it legal,” but the second, harder, more important question, “Is it right?” Along the way we get his perspective on the full range of topics buzzing among today’s legal commentariat: the trouble with Big Law, alternative fee arrangements, disaggregation, globalization, technology, legal operations, inside-outside relations, corporate boards, project management, legal education, associate development, leverage, legal media, legal process outsourcing, diversity, pro bono.

It is an exhilarating, invaluable work that has earned widespread praise. To quote one of the many over-the-moon comments, Karen Dillon, former editor of The American Lawyer and Harvard Business Review, says,  “This is a must-read for any general counsel – or those who aspire to the title. Ben Heineman figuratively – and now literally – wrote the book on how to be a general counsel for a world-class company. It should be within arms-reach of any general counsel who aspires to do the right things, too.”

Doing the right thing is the province of the “lawyer-statesman” (or stateswoman), which is not a new concept. But Heineman infuses it with fresh vitality. “The General Counsel as lawyer-statesman is not a passive servant inside the corporation, doing what the ‘client’ – the directors, CEO, and business leaders – tell her to do,” he writes. “[S]he must have the personal and organizational skills to find the difficult (at times treacherous) path between being both a partner to key businesspeople and guardian of the corporation in the service of the basic corporate mission: fusing high performance with high integrity and sound risk management.”

In Heineman’s case, you don’t have to look far for the inspiration for his vision and remarkable career. The apple didn’t fall far from the tree. His father, Ben W. Heineman, Sr., who died in 2012 at the age of 98, was a singular figure who pursued roles in law, business and government during an extraordinary career. Indeed, to hear those who knew him talk, such as Joseph A. Califano, Jr., President Lyndon Johnson’s chief domestic aide, he was the embodiment of the lawyer-statesman model embraced by his son.

“He was quite a selfless person,” Califano told The New York Times upon the senior Heienman’s passing. “He had no personal agenda. He told it like it was, which is very hard, and the most important thing you can do for a president or one of his top aides, like me, because people are usually fawning all over you.”

In an interview with Metropolitan Corporate Counsel, excerpted below, Heineman talks about his parents and a range of other topics.

On his upbringing: “I was fortunate to have two very loving parents, both great people. My mother was very active in child welfare and my father had a career in law, business and government and was a person of the highest integrity. There is no question that of all the people who influenced me – supreme court justices, presidents, teachers, business and law firm leaders – he influenced me the most. Nobody taught me as much as my father did.”

On legal education: “Law schools don’t teach lawyers to be problem solvers,” he says. “I’ve taught a course at Harvard and Yale that’s not just about legal problems. We barely use a case. It’s about the hard problems faced by companies such as BP and Siemens. While ‘Is it legal?’ is the first question for most issues, ‘Is it right?’ is just as important. It’s not about professional responsibility and the code of professional conduct. That’s don’t lie, don’t cheat, don’t steal. The much more difficult question is, ‘What are the right things to do?’ That means courses that range far beyond the perspectives of appellate judges.”

On working with GE CEOs Jack Welch and Jeffrey Immelt: “They are people of high integrity who really cared about the integrity of the company. They both wanted it straight from me. They knew happy talk got people into trouble. It wasn’t that I was right. It was that I provided a complementary perspective. Our job was to do great analysis. Sometimes it’s hard to get the CEO to slow down for a fuller discussion of a problem. A lot of these are complex, discretionary choices. If you just asked ‘Is it legal?’ you wouldn’t do anything. But there was never a time when I had to say, ‘You can’t do this.’ The key to resolution of the partner-guardian tension is that you’re credible and trying to slow down and have a discussion about different perspectives.”

On the challenges facing GCs at smaller companies: “I was at one extreme. I had 33 direct and strong dotted-line reports in a department of 1,300 lawyers in 100 countries when I left. I could hire great GCs for all of our divisions. If you’re in a smaller company, it’s a question of determining what the critical issues are. You can’t do what I did, but you can decide that there are three areas that are critical, and you should try to convince business leaders they need the best players in those areas. It’s not going to be the full team, but smaller companies should not face the same kind of risks that huge global companies such as GE do.”

On dealing with outside counsel: “The critical thing is segmentation, which inside lawyers don’t do well enough. You have to do that first to decide how to allocate resources along a spectrum ranging from low risk – low complexity work to high risk – high complexity work. There’s a wide array of choices in how you allocate resources; it’s not just big law firms. The big firms and their equity partners have a cockeyed view of productivity. It creates all sorts of problems. Even with very good firms, there’s a huge mediocre middle. Corporations do not trust the law firms because they’re under so much pressure to pursue their own economic interests. It’s a perpetual concern in the relationship. I won’t say absolutely you have to use smaller boutique firms – for something such as the AIG bankruptcy you may need 300 bodies – but you can still have a smaller, elite firm in the lead – riding sidecar with the GC. In my view, big is bad – with very few exceptions.”

On the evolution of legal operations: “The legal operations function is critically important. I had an in-house lawyer who worked for me [Suzanne Hawkins] in the early to mid-1990s and I made her Senior Counsel, Legal Operations. Her fundamental mission was the efficiency and effectiveness of the law department. We’d have end-of-year sessions focused on improving the legal organization by making it more efficient using initiatives advanced by the CEO and initiatives of our own. We wanted to make sure we were on the cutting edge of technology and of different types of relationships. Law firms do not have a monopoly on solving many kinds of problems. Whatever your relationship with the CEO, as GC you still have to make the case that you’re using money wisely. If you’re dealing with a BP or Siemens situation and everyone is threatened, you spend whatever it takes. For a lot of the other work, however, being able to demonstrate that you’re effective and efficient to the CEO and the finance function is important to your credibility. Legal ops is central to achieving that.”

On the special challenges facing global companies: “Culture is one of the most difficult challenges. The GC has to articulate a vision of the global legal organization and train and educate people who come from cultures where those ideas are not natural. I probably didn’t succeed on that as well as I should have. I gave speeches, but it was not the kind of education we needed. To drive it, you have to be more comprehensive. You can never underestimate the importance of truly creating culture and not just talking about it.”

On the state of the profession: “There are lots of reasons to be critical about the profession and pessimistic about the future. It is overwhelmingly motivated by money, as we seem to be in a materialistic cycle. Still, I’m excited about the possibilities that come with being embedded in an organization. For every bad company there are two or three good ones. There are many great law firms and many great lawyers. I’m optimistic about the potential for the GC and inside lawyers – that’s why there’s been a revolution. The quality of inside lawyers is exponentially higher than it was 10-15 years ago. Take the 50 GCs at the top 50 companies. They would all say it’s a great job.”