What CEOs Really Think Of Outside Counsel

Business executives are the “plum” clients that private practitioners will climb over each other to get.

In smaller companies, these executives often drive decisions to hire law firms. And in larger companies they hire in-house lawyers and frequently make or influence the choice of outside firms in major transactions or litigation.

Lawyers Weekly asked three high-ranking Massachusetts executives what they really think about lawyers.

Some common themes emerged in that all three prefer advocates who:

• Understand their business;
• Build relationships with them in the process of handling their legal issues;
• Spend some additional “relationship time” without billing for it; and
• Cultivate the art of listening rather than talking all the time.

‘I like to see a lot of practical experience’

EXECUTIVE: Charles T. Verde, President and CEO of U.S. Mills, Inc. in Needham

Verde has managed U.S. Mills and its predecessor company, Erewhon, Inc., since 1982. Prior to that time, he managed the marketing consulting group of Arnold & Co., a major Boston-based ad agency, and he also served as a marketing director for the Gillette Co. He has been dealing with in-house and outside lawyers as an executive since 1982, typically for help in basic corporate law, acquisitions, litigation, trademarks, patents and employment law.

COMPANY DESCRIPTION: U.S. Mills owns and sells a variety of natural food products and specialty cereals with widely recognized brands. The Erewhon and New Morning brands are associated with pioneer products in natural foods, while the Farina Mills brand has been applied to a variety of food products since 1893.

Q. What are your suggestions for working with lawyers?

A. I have learned to be emphatic about the business aspects of a deal. It is wise to listen to your lawyers about the legal aspects of a deal, but make your own decisions on business issues. A good lawyer understands and encourages this.

Q. How do you select a lawyer for business or personal reasons?

A. Many times I get referrals from other lawyers or business contacts. Accounting firms and investment banking groups also provide some good recommendations.

Q. What impresses you about a lawyer?

A. I like to see a lot of practical experience and you have to have good chemistry. If you can’t trust someone and open up to him or her, then you have a problem. I want to deal with compatible people who have the same ethics and standards as me. I want an attorney who stands up and says, “That’s wrong.” I also want solutions that work for all the parties and an honest answer when it’s not worth it to fight an opponent. I don’t want somebody who just says, “Let’s go after the bastards.”

Q. Among your executive peers, do you think that is a common complaint?

A. Yes. The litigious nature of our society is negative. Too many lawyers are pushing lawsuits. There’s a feeling that some lawyers are less concerned about right or wrong and more concerned about making money. Look at the recent suit against McDonald’s for making people overweight. How can you even think that would be valid?

Q. How can attorneys build long-term relationships with client companies?

A. If I were an attorney, I would do my best to make sure it never appeared that I was just generating fees. But if I were a lawyer, clients would probably shoot me because I talk too much. [Laughs]. Lawyers shouldn’t talk in circles before they come to the point. They should be as aware of the meter running as the client is. I have been around a few attorneys who sound like they are just talking to generate billable time. On the other hand, some lawyers can explain a complicated matter quickly and they just get to the point.

Q. Are you impressed when lawyers actually make money for your company?

A. Yes. They can do that by getting us not to pursue matters that are a waste of money, or they can come up with solutions that help make money. Our trademark counsel has helped us make money in situations that could have turned into litigation. Sometimes we have bought a trade name that was in dispute, or we have licensed one for valuable money in the right situation. In another situation, our corporate lawyer helped us get money back from an out-of-state operation that was deceitfully taking sample products from us for marketing to potentially new customers.

Q. Have you ever had a very negative experience with a lawyer?

A. I do recall one with an out-of-state lawyer. A supplier gave us some bad product, and there was no question about it. We moved toward trial with nothing but signals that we would win, and then our own lawyers kept pushing us to settle. I’m not saying anybody did anything wrong, but we lost confidence in those attorneys. CEOs don’t generally talk about those experiences and mention names, but I wouldn’t refer that firm to anyone.

Q. Do you have any pet peeves about legal bills or the cost of legal services?

A. Generally, my own lawyers have been good. My big concern over the years has been in dealing with a law firm who is billing us for a bank or another institution that makes us pay their fees. That is a real sore spot with me and with other people I know. When I’ve had to pay the fees for another institution, the result is usually abominable. We have no say in whether we pay for junior or senior attorneys or how many of them there are, and yet we have to pay the bill — even when the whole thing could be boilerplate. They run up the bills and we have no control over it. It’s not right.

‘CEOs Are Wise To Open The Door And Let Lawyers In’

EXECUTIVE: Carol A. Vallone, President and CEO of WebCT, Inc. in Lynnfield

Vallone launched the predecessor company to WebCT in 1995. For more than 20 years, she has managed technology companies and brought software products to market. She also serves on several local boards of directors and was named one of the most influential women in technology by an international women’s organization. She has dealt with lawyers since the founding of her company in 1995, prior to which she ran a corporate training business from 1987 to 1995.

COMPANY DESCRIPTION: WebCT is a major technology provider for Internet-based learning systems for classroom instruction online. The company serves more than 2,000 higher education institutions and other education clients worldwide. Investors with a local presence include: CMGI; FleetBank; JP Morgan Partners; and Thomson Corp.

Q. When selecting a lawyer, how do you make the choice?

A. We were interested in a law firm we could use as a single source with expertise across all areas we would need. We looked at our compatibility with the customers they serve. We wanted technology-based lawyers with business savvy. We talked with five firms, and it was primarily my decision. The pitch of smaller firms was: “We will pay closer attention to you.” I was actually a little leery of getting lost by a big firm. I wanted partner-level attention — no schlepping off to lower-level people without experience. But our current counsel, Testa, Hurwitz & Thibeault [of Boston], had the experience and the breadth of knowledge across many disciplines along with the promise of personalized service like a smaller firm. If I found the network and breadth of experience in a small firm, I would have considered that.

Q. Do you have regular meetings without the meter running?

A. Yes, absolutely. Relationship meetings are very important. Our attorney is participating in an upcoming board meeting, and I have asked him to sit through all the corporate presentations first to get caught up on the company. He said, “I’m there to get the knowledge I need to help me help your company, so of course I am not going to charge you for that.” That’s a solid example of focus on us. I value that a lot.

Q. Have you ever had a negative experience with a lawyer?

A. When I first started the company, we started as a [limited liability company] based on advice from another firm. In hindsight, that was bad advice. Structuring our company as an LLC, knowing that investors would be coming in to look at us, was wrong. We had to change our corporate structure to accommodate “angel” investors. So the advice really didn’t consider where we were going in the future.

Q. Have you had any irritations with lawyers other than service-related ones?

A. We culturally always look at situations as win-win. We once had a lawyer that I walked into a negotiation with, and he was cutthroat with an opposing partner. This guy came on in a way that alienated the strategic partnership and I had to do some damage control. He was too hard-nosed in trying to get our pound of flesh out of it. I wanted a win-win. If everyone is not winning, the deal is not going to last long.

Q. Among your executive peers, what praises or complaints do you hear about lawyers?

A. I would say there’s an issue on billing. People ask, “How many people can be thrown on my project and how much billing can be done on my account?” That seems to be a big issue. Another issue is putting too many junior people on projects so it becomes an endless cycle of learning at the client’s expense.

Q. So most people want the more expensive senior lawyer for most purposes?

A. Yes. It is fine to let a junior person do research with a senior person always looking at the work and the bill before it goes out the door. But you have to train the junior person so they know what they are trying to accomplish. That’s absolutely important to me. I am very sensitive to the fact that you learn by being part of the process, but I don’t want it happening purely at the expense of my nickel.

Q. What are the best positive comments you hear about lawyers?

A. Another positive is from the network perspective. Law firms are good at introducing CEOs to CFO candidates, or potential customers, investors or other strategic partners.

Q. What else is important to you?

A. We have a lot of laughs with our firm. We have been through some weighty and serious issues. That can be stressful, but somehow there is always a sense of humor and camaraderie in the process and that is very much appreciated. It reflects a certain maturity to understand that everything isn’t so serious. We want a serious effort, but if we are doing a difficult deal, it helps to laugh about it some.

Q. Do you think your approach to business-legal matters is any different as a woman CEO in the largely male culture of technology?

A. I’m sensitive to how hard people are working and the effort they are making, especially at our law firm. At the close of every round of funding, we as a company have always taken all of our lawyers out to celebrate because we know they put a lot of effort into the funding. We did the same thing at the close of two acquisitions and the close of a major strategic relationship. I am sensitive to people’s efforts. I don’t know if that is being female or just being me, but it is something our lawyers point out that is different about our company.

Q. Is it part of your success to say, “I don’t know” and to ask for help from lawyers?

A. No question. I’m very ready to ask what I need to know and what I need to do. I think this is important for CEOs to remember when working with lawyers because you can short circuit a lot of trouble that way. CEOs are wise to open the door and let lawyers in. It has been to our advantage here, but not everyone does it.

Q. Do you have a philosophy about in-house and outside lawyers?

A. We talk about having a few in-house lawyers eventually. There’s no expert across a whole spectrum of issues, so I am interested in a team of both kinds of lawyers.

‘You Really Need To Advance The Ball And Not Fight Over It’

EXECUTIVE: Andrew H. Moser, National Retail Finance Group Leader for CapitalSource Finance LLC in Dedham

Moser leads the financing arm of CapitalSource that makes loans to retail and consumer products companies. He’s also the former president of Paragon Capital LLC, another major commercial lender. The Associated Press, Bloomberg Business News and other national media cite him regularly as an expert on the retail industry Presently working in the retail lending space of finance, he deals with business lawyers on issues involving retailers or consumer products companies. Attorneys help Moser with underwriting documentation, basic loan documents and the like.

COMPANY DESCRIPTION: CapitalSource is a major commercial lending firm with more than $2.5 billion in financing capability. The firm makes senior and junior loans in the $1-$50 million range, and works with other lenders in larger transactions. Typical clients include retailers, health care providers and consumer products companies.

Q. How do you select a lawyer for business or personal needs?

A. At CapitalSource, we have in-house counsel for much of our support, so that kind of differentiates us a little. We can draw upon a staff of five or six lawyers to support all of our business lines. In the past, I always hired people for the knowledge I don’t have. The retail lending community is very tight, so we also rely on lawyers for referrals to other lawyers when we need them. You definitely have to match personalities with situations. A situation calling for advice is different from one of collection. I have to think about who is on the other side as well. In acquisition financing, a big house often hires a very big firm. If we are on the other side, we try to match up with similar counsel. Things get negotiated differently then and the lawyers take control.

Q. What impresses you about a lawyer?

A. I look for lawyers who share my view that you really need to advance the ball and not fight over it. Lawyers who understand this process and the end game will do well with me. I want people who can figure out how to get something done and not just say “no.” Some people just spot the obstacles, while others anticipate things and have solutions ahead of time.

Q. What do you want to see from lawyers in the future?

A. I want people to draw on their experience. Too often, lawyers don’t do enough of that. They start everything anew all over again. I like to see them utilize significant past experience within our industry or even working with our company.

Q. Have you had any negative experiences with lawyers?

A. Some attorneys can’t get past the practical nature of things. They can’t balance theory with what happens in the real world. I’ve learned from some great lawyers that you have to understand what the other party needs and wants from the process. If everyone understands that, you can get to the goal. That also helps in assessing whether the deal can be done. But you have to listen. Lots of lawyers are great pontificators, but the best lawyers are great active listeners. This is true in business too. Communication is not just talking; it’s much more about listening.

Q. Has anything irritated you about a lawyer other than service issues? Like billings?

A. [Laughs]. Well, I like to think I can get a bit of my lawyer’s time without having it all accounted for on a bill. I also like to think I’m getting their historical experience without being charged for learning. Nobody minds paying fees for good advice and getting to the right place, but pontificating and fighting do not sit well with me at all.

Q. Among your executive peers, what pros and cons do you usually hear about lawyers?

A. What I hear most is that we’re paying to train a lot of junior people. Also, there’s a big negative about bulldogs that just add pressure to a situation. They don’t see the end game for both sides. Lawyers who don’t know how to advance the process are a problem.

Q. Do you look for lawyers to protect you from front-page embarrassment?

A. I love lawyers who want to grow the professional relationship and can make it a personal relationship. To do that, they have to show a keen interest in our business and learn what’s relevant for us. I love getting e-mails of articles without getting billed for it too. We get more of that value added service I believe from smaller boutique firms. Larger firms have to account for every minute of time I think.

Q. Do you like lawyers who help bring you deals or opportunities?

A. Some people do choose lawyers as a business development tool. That’s not my philosophy, and I never go in thinking of that. But good lawyers often do that, and it can be a great thing. It shows a lawyer understands you and knows whom you can help.

Questions or comments may be directed to the writer at [email protected].