Cost Concerns Most Important IssueFor Chief Legal Officers, Survey Shows

Thursday, January 1, 2004 - 00:00

The 2003 Chief Legal Officer Survey, conducted annually by the Association of Corporate Counsel (ACC) and Altman Weil, Inc., was released last month. The survey reports that cost concerns are driving chief legal officers' hiring and firing decisions in 2003. And while a majority reports stable or improved operations in light of new corporate governance rules, a significant minority sees the situation differently.

The fourth Chief Legal Officer Survey canvassed chief legal officers (CLOs) in attendance at ACC's Annual Meeting in San Francisco in October. Survey data is based on 137 responses received.

Fifty-nine percent of chief legal officers surveyed indicated they have fired or were considering firing at least one of their outside law firms in 2003, up 4.2 percent from 2002 and over 50 percent for the fourth year running. The number one reason given for terminating a relationship was "cost management issues," followed by "lack of responsiveness" and "overworking projects."

When asked about the most innovative practice proposed or instituted by outside counsel in 2003, CLOs ranked fee arrangements number one - although only 22 percent of respondents were able to identify any innovation at all.

"The current economic pressures on corporations are reverberating in law departments," notes Dan DiLucchio, an Altman Weil principal. "If law firms don't show some flexibility and imagination in working with clients on managing costs, they risk losing those clients to a firm that will."

The new corporate governance rules have not affected CLOs' relationship with senior management, according to 66.4 percent of respondents; 17.6 percent considered the relationship much improved, and only 10.7 percent thought the relationship had been affected adversely. However, when asked about the impact on the attorney-client relationship, 32.2 percent thought that trust was adversely affected, and 22.2 percent of CLOs believe that new attorney reporting obligations will make senior managers less likely to seek legal advice.

In addition, 72 percent of chief legal officers think the new governance rules make senior management either "definitely" or "a little more" risk averse than in the past. And 36.3 percent are more concerned about their own personal liability relating to corporate misconduct.

Not surprisingly, CLOs identified Sarbanes-Oxley compliance as the primary emerging client relationship issue for the coming year.