Editor's Note: In January, Tyco International Ltd. (Tyco) and Eversheds LLP announced the launch of an innovative new corporate model that will provide Tyco with an expanded array of legal services across Europe, the Middle East, and Africa (EMEA).
Editor: Bill, please describe Tyco International Ltd. (Tyco) .
Lytton: Tyco is a global, diversified company that provides vital products and services to customers throughout the world in four business segments: Electronics, Fire & Security, Healthcare, and Engineered Products & Services. Tyco employs approximately 250,000 people worldwide. In January, Tyco announced its intent to divide the company's portfolio of diverse businesses that generated $41 billion in net revenue in fiscal 2006, into three independent companies through tax-free stock dividends to Tyco shareholders. The separation is expected to occur early in the second calendar quarter of 2007.
Although Tyco's senior management and its headquarters staff is located in the U.S., more than half of its workforce and sales are outside the U.S.
Editor: Bill, tell us about Tyco's in-house legal operations.
Lytton: All of the company's lawyers and compliance personnel report on a solid line basis to me as General Counsel and Chief Compliance Officer. I have the responsibility for their activities and assuring control of their budgets. I am also responsible for assuring that they have the necessary tools to do their jobs, including those required for them to discharge their compliance obligations. Ed Breen, our Chairman and CEO, and I felt that this was the best way of assuring that the lawyers fulfilled their professional obligations to Tyco's shareholders under Section 307 of Sarbanes-Oxley and the ABA Model Rules of Professional Ethics.
When I joined Tyco over four years ago, an immediate challenge was to reduce the number of outside counsel within the United States and to reorganize its domestic legal operations. We have been successful with the result that our legal expenses were reduced by many millions of dollars.
Editor: Why did Tyco feel that it was desirable to reduce the number of law firms that it uses in EMEA from 250 to a single firm - Eversheds LLP?
Lytton: As with our earlier U.S. convergence program, we felt that a significant reduction in legal costs as well as more effective representation could be achieved in EMEA countries through a convergence program that would drastically reduce the number of law firms. We selected Eversheds after an intensive RFP process.
We decided that we needed a mix of Tyco lawyers working with a regional outside legal team across EMEA. It would not have been economical for us to bring in 100 subject matter experts to cover the business so we looked for opportunities to team with law firms that could provide those services. In reviewing the law firm responses to our RFP, we narrowed the field to a couple of firms and had intense conversations with them before selecting Eversheds.
We selected Eversheds because we felt that it was best suited to the task across EMEA and would complement the efforts of our internal lawyers. Furthermore, Eversheds already had the experience of playing the role that we envisioned for it.
Smith: We've known and worked with the in-house lawyers at Tyco for some time, and this opportunity that was initiated by Tyco provided us with a perfect opportunity to put to the test what we've been working towards in the last few years. Some may not realize that Eversheds is such a global firm - we have significant offices in 13 countries in Europe, we just opened an office in Qatar, and we're in China. We've worked more actively with U.S. companies over the last 20 years than probably any other non-U.S. law firm. Through our pan-European work with DuPont, Cisco, Axa and Akzo Nobel among others, we've learned that large global companies want accountability, transparency and predictability from us - they already assume that our legal advice will be top quality. If it weren't, they would not consider us.
For this exciting venture with Tyco, we are leveraging our major investments in technology, teamwork and business processes across our international offices in the EMEA region, so that we can work seamlessly with Tyco and deliver on their expectations. The issues and processes for multi-jurisdictional businesses are inevitably complex, and a straightforward, open relationship with the client is essential.
Editor: What steps have been taken to reorganize the in-house legal team responsible for EMEA?
Lytton: In addition to our restructuring of outside legal services, we modified our organization structure in EMEA so that our internal and external legal resources could work together as efficiently and effectively as possible. Tyco's internal regional teams have been revamped through the hiring of highly qualified legal personnel in France, Germany, the Czech Republic, and Spain. Additional internal hiring is currently underway in South Africa and in the Benelux countries. All of our international lawyers, including Trevor Faure, our EMEA General Counsel, report to my deputy, Tim Flanigan.
Editor: Please describe the SMARTER model.
Lytton: SMARTER stands for Segment and Subject Management, Regional Teams, and External Resources. The new program is being deployed for Tyco's Fire & Security, Tyco Engineered Products & Services, and Tyco Safety Products segments throughout the EMEA region. Under this model, responsibility is assumed by senior staff lawyers with responsibility for a specific business segment in the region. Regional lawyers report to them and provide the local law and language expertise across segments. Dedicated, full-time Eversheds lawyers complement this coverage by ensuring broad geographic coverage and an ongoing link with the Eversheds parent firm.
Smith: We believe that clients should be able to measure the effectiveness of their legal services provider and that is our starting point. We have worked closely with Tyco to develop a day-to-day working approach that fits the needs of their businesses and that allows them to always know where projects stand. Together we have carefully identified the areas of compliance, legal risk management and legal support where Eversheds will be involved. Solid systems, consistent reporting and regular communications are probably the key elements of the SMARTER program. This uniform approach has been adopted across all Eversheds offices involved in work for Tyco.
The SMARTER model calls for full-time, dedicated Eversheds lawyers in the United Kingdom, France, Germany, Italy, the Middle East, Poland, Benelux, and South Africa. All of our lawyers are linked to Tyco's regional team - we operate as one cohesive legal function. Eversheds will be ensuring that its legal advisors are prominent within Tyco businesses but are also able to work within our firm so that they can draw on specialist advice and resources as required. We see this flexible arrangement as being a significant advantage of the association between Tyco and Eversheds.
Editor: How will Tyco's relationship with Eversheds improve corporate governance and global compliance?
Lytton: Because Eversheds has had a presence in EMEA for many years and has built up valuable relationships there, it can contribute immensely to Tyco's objective of conducting business in an ethically and compliant manner.
In order to implement the SMARTER program, we have designated Enrique Eznar as compliance counsel in Europe. With that added resource, the strengthening of our regional teams and our relationship with Eversheds, we have enhanced our ability to do what our shareholders and the board of directors want us to do - to conduct our business in a compliant and ethical manner.
Smith: This project is all about better legal risk management. With Tyco's in-house team, we are extending the coverage of legal services in the company and improving the level of resources on the job locally, throughout the EMEA region. The result will be significantly greater oversight at every level of the business units involved, so that compliance and governance controls of all kinds will be strengthened. The model should yield, over time, substantial savings which will be realized in various ways, including the enhanced protection provided to the assets and legal rights of the company.
Editor: How does the SMARTER program allow Tyco to manage its regulatory requirements in a more efficient manner?
Lytton: We have a wide spectrum of regulatory issues around the world from those relating to import/export to healthcare. We have an outstanding regulatory team that includes Matt Tanzer, chief counsel for compliance and regulatory matters, and Carol Fuchs, our chief import/export trade compliance counsel, working out of Washington.
We not only have expertise in our corporate legal department focused on global regulatory and compliance matters, but we also have regional experts working on the same kinds of issues at a local level. That is an important part of our unyielding commitment to compliance, integrity and ethics.
Smith: Global companies need a rational, measurable approach to managing the delivery of legal services across multiple countries without building huge, inefficient in-house legal staffs or long, cumbersome and expensive rosters of outside law firms. This model demonstrates one solution.
Editor: Paul, do you consider your firm's new role with Tyco to be a partnering relationship?
Smith: Yes. We had the benefit of being a DuPont Primary Law Firm for the last 10 years in Europe. I would categorize our relationship with Tyco as a classic partnering relationship where you create structures and work together for each other's long term benefit.
For example, there are various informational and productivity enhancement tools that Eversheds is providing as part of our partnership with Tyco. They include:
Local language and business expertise in contracts, employment, compliance, environmental health and safety, major litigation, intellectual property, and general corporate matters.
Contract automation, business process redesign, and a legal extranet integrated into Tyco's business by Eversheds (to facilitate online reporting and invoicing).
A 24x7x365 legal hotline.
Editor: Does your involvement with Eversheds enhance your efforts with respect to good corporate citizenship?
Lytton: Yes. They have a great reputation in Europe and beyond. They would not have been considered by us if they did not have that reputation. Paul has described our relationship as "partnering." I am comfortable with that. I want our law firm to tell us how we can do better, how we can be a better client and how we can be a better corporate citizen and enhance our processes and culture. As with all partners, we look forward to an enduring relationship with Eversheds based on a candid dialogue and a deep commitment to common goals.