Sara Lee Corporation: An Enterprise Built On Integrity

Saturday, May 1, 2004 - 01:00

The Editor interviews Roderick A. Palmore, General Counsel and Secretary, Sara Lee Corporation.

Editor: Would you give our readers something of your background and experience?

Palmore:
I have been practicing law since 1977. I was a partner in several major law firms here in Chicago engaged in litigating civil matters of all sorts. Prior to that I spent three years in the United States Attorney's Office. Before joining Sara Lee in 1996, I was a trial lawyer for the better part of 20 years. One of my biggest concerns was that I would miss the courtroom and the thrill of addressing a jury. But that has been replaced by other, equally stimulating and equally rewarding, challenges.

Editor: How did you come to Sara Lee?

Palmore:
In the mid-1990s I was introduced to the then General Counsel of Sara Lee. My objective, of course, was to develop a business relationship with her, and I was very encouraged by the fact that we hit it off. Then in late 1996 she called me and indicated that she was looking for a number two person for the Sara Lee legal department. She went on to say that she wanted to talk to me about the position. The rest is history.

Editor: Please tell us about the legal department at Sara Lee.

Palmore:
As General Counsel I have responsibility for all of the corporation's legal affairs. Most of the staff functions of the department take place here in Chicago, at corporate headquarters. There are between 60 and 70 lawyers at Sara Lee, and, of course, within that group a variety of disciplines are represented. We have intellectual property lawyers, people with strong transactional backgrounds - deal lawyers - those with financial and treasury function expertise, and so on. In addition, most of the lawyers who have responsibility for operating companies are dispersed throughout the world. This is a reflection of our general philosophy at Sara Lee: we want our lawyers to be as closely aligned as possible with operational management and to develop close working relationships with management. As but one example, one of our core businesses, the bakery group, which is based in St. Louis, has its own dedicated group of lawyers headed by a chief counsel.

Editor: Please tell us about your relationships with outside counsel.

Palmore:
We have what I like to describe as a family of law firms that have done work for us for some considerable time. Almost without exception, these firms have a history with us and have been part of a dialogue going back for many years. We know, and appreciate, the quality of their work, and they know our particular needs. This is a two-way conversation that can only evolve over time. When I came to Sara Lee a much greater number of firms provided legal services to the corporation. At that time one of our objectives was to whittle down that number, something that is very important to an enterprise like ours from a control and efficiency standpoint. In recent years we have been fairly successful in this effort.

Editor: When you are called upon to bring new outside lawyers into the fold, do you utilize some established selection process?

Palmore:
We employ a selection checklist - nothing out of the ordinary - that most corporations would use to select the best outside talent to handle something. We look at experience and we assess expertise. We also look at the resources available to that person and, if it is a factor, his or her familiarity with the locale. We do tend to engage lawyers as individuals and by way of subject-matter expertise rather than law firms. We do not retain a law firm, for example, to handle all of our work in one geographic area.

Editor: With over 145,000 employees worldwide and operations in some 55 countries, Sara Lee is a major international enterprise. Please tell us how this affects your position as General Counsel. That is, are you supervising legal operations overseas? Selecting local counsel in foreign jurisdictions?

Palmore:
Yes, I have responsibility for supervising legal operations overseas, and I am responsible for selecting counsel in foreign jurisdictions. I hasten to add, I am hardly an expert on the prevailing law in those jurisdictions, so I am very dependent on my staff in the selection process.

Editor: One of the ongoing themes of our publication is global corporate citizenship. Will you tell us how Sara Lee developed its Global Business Standards?

Palmore:
Sara Lee's Global Business Standards are relatively new and evolved from its Code of Conduct. The Code of Conduct was in place when I joined the company. The notion behind the Global Business Standards was that the Code needed to be taken to a new level and speak to everyone across the enterprise and in all the countries where we do business. It was, and is, meant to reinforce standards of ethical conduct to which we at Sara Lee have always adhered but which require some means of concrete application. No one questions the why of a code of business ethics. It is the how of providing that code with a framework within which to operate that is the challenge. Another way of putting this is to say that such a code must be more than a pious hope; it must be a reality which everyone sees and which is seen to have universal application. The framework is run by a Senior Management Business Practices Committee, which I chair, and which oversees, through a corporate Business Practices Officer, the work of an enterprise-wide team of people charged with making certain that the matters which need to be brought to the attention of senior management are properly processed and addressed.

Editor: There must be a certain amount of tension between the desire for uniformity throughout the enterprise, particularly in the area of business ethics, on the one hand, and operational autonomy on the other. Has this been a problem for you?

Palmore:
In light of the many cultures which exist within our worldwide workforce, there is an ongoing challenge in this respect. There are things that, of course, every culture recognizes as clearly wrong and unacceptable to the enterprise. A uniformity of response, however, is not always easy to attain. The business practices system that we have put into place permits any employee to report, anonymously, on any issue or problem and from any place in the world. That system is operated by a third party, not by the enterprise itself. Nevertheless, there are cultures where Sara Lee conducts operations within which anonymous reporting is rare, irrespective of the gravity of the situation and the potential harm that might ensue were it not corrected. We continually attempt to address this reluctance to use the system, and, over time, I believe we are seeing a common standard of expectation beginning to emerge. This is a challenge, however.

Editor: When you say that Sara Lee is committed to the economic and social development of the places where it conducts operations, what does that mean as a practical matter?

Palmore:
One of the most inspiring things about this organization is the sense of corporate citizenship people feel at every level. People take great pride in engaging in charitable and civic and educational work, in contributing to the well being of the communities within which they live and work, as representatives of Sara Lee. This is true at virtually every Sara Lee site across the world, and it seems to be a defining characteristic of the brand, if that is the right word. Certainly there is both an individual and collective respect for contributing to the community that defines the enterprise.

Editor: Will you tell us how integrity in the marketplace builds shareholder value?

Palmore:
There are instances where one could make more money by acting illegally. In light of the recent corporate scandals, you do not have to look very far afield for examples. In the short run, there may be rewards that attend this type of activity. In the long run, however, almost invariably those who attempt to cut corners in pursuit of profits wind up losing the race. It is their directors and senior management who are hauled into a very harsh spotlight, and it is their employees and shareholders who wind up with little or nothing to show for years of effort or substantial investments. We have seen all of this in extraordinary detail in recent years. By way of contrast, integrity in the marketplace is not always, or even often, associated with windfall profits, but it is often associated with steady growth, with customers who value the organization's products and services, with employees who take pride in what they do and in the profile the organization projects and with a corporate image that enjoys public trust. And all of that translates to shareholder value.

Editor: And the connection between corporate standards of integrity and employee morale?

Palmore:
I think there is a direct correlation. People within an organization have a very good idea of what is going on. If they conclude that the ethical underpinnings are absent, or even weak, they tend to develop a certain cynicism about what they are doing, about management and their fellow workers, about the face the organization seeks to show the public and so on. That cynicism informs everything they do. On the other hand, employees who have confidence in the integrity of the enterprise feel good about what they are doing and about themselves. They take pride in being part of an enterprise that is built upon integrity, and that informs everything they do.