And Where Were the Lawyers?

Although the focus of this blog is the Big 4 audit firms, I believe the audit firms and professional services, in general, are an underexamined and an underserved market sector. I am always glad to learn of other consultants and service firms, like the previously mentioned Ames Research Group , Clovis Inc., and David Maister, professionals that concentrate on the sector and add knowledge and insight into its unique business model.

And so it was nice to find this article by Altman Weil, consultants to law firms. Along with Hildebrandt, they bring an interesting perspective to this type of professional serivices firm and I read their updates frequently, since many of the same issues abound in the accounting and consulting firms which are my primary interest.

Some excerpts:

“The media, government, class action bar, judges, juries and members of the public have high expectations for lawyers when it comes to spotting legal problems and doing something about them. …In this environment, it is more important than ever that in-house counsel identify and carefully manage actual and potential conflicts of interest. Below are some examples of the sort of conflicts that regularly confront in-house counsel:

Conflicting Interests among Senior Executives – There are often situations in which an in-house attorney is asked to advise a senior executive about matters in which his or her personal interest conflicts directly with the interests of the corporation.

Non-Conflicting Personal Interests among Senior Executives – Another common occurrence is the request by senior executives for free legal advice regarding strictly personal matters unrelated to the company.

Indirect and Potential Management Conflicts – Some of the most difficult issues arise when senior executives (or members of their immediate family) have financial interests in enterprises that do business with the company, such as suppliers, customers or affiliates.

Law Firms and Other Suppliers of Legal Services – In-house counsel generally do not have financial interests in outside law firms. But an attorney who is on a leave of absence from a firm may have a financial interest in his or her firm through a continuing interest in a retirement or profit-sharing plan. …These financial conflicts should be subject to the company’s procedures for managing conflicts. There is no rational basis for exempting in-house attorneys.

Lawyers Acting in Business Roles – One of the benefits of serving as inhouse counsel is the opportunity to be involved in making business decisions rather than merely giving legal advice. Many attorneys who manage transactions or disputes routinely make business judgments on behalf of the corporation. The issue here is who, if anyone, will provide legal advice about the business decisions made by the lawyers.”

But some companies and their lawyers keep repeating their mistakes… They’re creative only when doing wrong, not doing right. Aren’t the outside guys paid well to keep the inside guys out of trouble?

HP Names Michael Holston as General Counsel
Palo Alto, Calif., Feb. 7, 2007
HP today announced the appointment of Michael J. Holston as executive vice president and general counsel, reporting to Mark Hurd, HP chairman and chief executive officer, effective Feb. 22. He also will join the company’s Executive Council leadership team.

Holston, 44, is a partner at Morgan Lewis. He has supported HP as external counsel for more than 10 years on a variety of litigation and regulatory matters. He will be responsible for the company’s legal affairs, as well as compliance, government affairs, privacy and ethics.