Chief Legal Officers Continue to Voice Dissatisfaction with Outside Counsel, Survey Report
(Newtown Square, PA, December 11, 2002) – For the third year in a row, the American Corporate Counsel Association (ACCA) and Altman Weil, Inc. surveyed Chief Legal Officers (CLOs) in attendance at ACCA’s Annual Meeting to capture their thinking on current trends and challenges for the in-house law department. And for the third year running, over 50% of CLOs surveyed reported they have fired or are considering firing at least one of their outside law firms in 2002, citing ‘lack of responsiveness’ as the primary reason.
“Too often law firms just aren’t listening to their clients,” says Altman Weil principal and law department expert Dan DiLucchio. “Providing high-quality legal work is critical, but it’s not the only factor in the equation. Business and service factors also come into play.”
The Third Annual Chief Legal Officer Survey also reports on the law department’s evolving role in the corporation after passage of the Sarbanes-Oxley Act, ethics, the attorney-client privilege, new in-house hiring and the use of outside counsel. Survey data is based on 136 responses received in October 2002.
Law Firms Fall Short Again
55% of Chief Legal Officers surveyed indicated they have fired or were considering firing outside counsel in 2002, compared with 62% in 2001 and 63% in 2000. Each year ‘lack of responsiveness’ has been the number one reason for dissatisfaction. When asked about the most innovative practice proposed or instituted by outside counsel in the last year, the greatest number of respondents said that there were ‘none.’
“Most client relationships are managed by individual partners” notes Altman Weil’s Ward Bower, “and that means the quality of client service is dependent on those individuals. Law firms that are smart enough to develop firm-wide client service strategies and invest in systematically training their lawyers in this area have a significant competitive edge.”
The Law Department’s Role Post-Enron
Recent headlines were clearly in mind when Survey respondents noted that the most important things a general counsel does for the board of directors are to ‘candidly assess the risks of various courses of action,’ ensure ‘appropriate corporate governance’ and ensure ‘sound corporate compliance programs.’ Chief Legal Officers’ top response regarding the value a law department provides to its organization was ‘minimizing risk. The three most significant ethical issues a corporation faces are: ‘misrepresentation of its financial condition,’ ‘conflicts of interest,’ and ‘fraud,’ according to the Survey.
”The concerns regarding ethics and risk management clearly reflect the current business climate post-Enron,” notes American Corporate Counsel Association President Frederick J. Krebs. “In-house lawyers will play a leading role in implementing new rules of corporate accountability.”
Over 57% of survey respondents indicated that the attorney-client privilege, which underpins the relationship between attorneys and their clients, is more important in today’s environment. Nearly all of the Survey respondents (92%) indicated that a weakening or loss of the privilege would have at least some affect on their ability to represent their clients. Over a third (36%) said that it would greatly affect their ability to do their jobs.
Inside / Outside Mix
Optimism regarding in-house hiring rebounded in 2002. The Survey reports 37% of CLOs plan to increase in-house lawyer staff in the next twelve months, compared to 18% in 2001. Use of outside counsel should remain relatively stable, with 24% of CLOs planning to increase use of outside law firms, 19% to decrease, and 50% to remain the same.
ACCA, Altman Weil
The American Corporate Counsel Association is the in-house bar associationSM serving the professional needs of attorneys who practice in the legal departments of corporations and other private sector organizations worldwide. The Association promotes the common interests of its members, contributes to their continuing education, seeks to improve understanding of the role of in-house attorneys, and encourages advancements in standards of corporate legal practice. Since its founding in 1982, the association has grown to more than 14,000 members in 40 countries who represent 6500 corporations.
Founded in 1970, Altman Weil, Inc. provides management consulting services to law firms, law departments, governmental legal organizations and legal vendors throughout North America, Latin America, the U.K. and Europe. Altman Weil’s consultants have some of the most impressive credentials in the industry, with backgrounds in law, industry, finance, marketing, administration and government. Altman Weil is also known for the many legal economic and management surveys it regularly conducts and publishes, including the Survey of Law Firm Economics and the Law Department Compensation Benchmarking Survey, which it publishes in association with ACCA.
Complete results of the Third Annual Chief Legal Officer Survey are available online at www.acca.com/Surveys/CLO2002.pdf and www.altmanweil.com/news/acca.cfm. For more information about the American Corporate Counsel Association go to www.acca.com. For more information about Altman Weil, Inc. visit www.altmanweil.com.
Contact:
Daniel J. DiLucchio
Altman Weil, Inc.
610.886.2000
djdilucchio@altmanweil.com
Deneen Stambone
ACCA
202.293.4103, x 319
stambone@acca.com
