There are a number of places a law firm wanting to do its homework on a client could go for polished, easily digestible information: annual reports, earnings calls, press releases, and news coverage, for example. David Leitch, Group Vice President and General Counsel at Ford Motor Company, suggests lawyers should also dig into a company’s SEC filings.
“There’s a lot of information about the business in there, too — information about how we think, how we’re organized, and what our risks and challenges are,” Leitch said.
But studying SEC filings is not for the faint of heart (an idiom which in this case is perhaps a stand-in for “the easily put to sleep”). Ford’s 2015 10-K, for example, is close to 200 pages long, and a company Ford’s size may file multiple forms with the SEC almost every week.
A firm’s reluctance to do this kind of homework would be understandable from a strategic perspective, too — the hours spent with a company’s 8-Ks, 10-Ks, and 10-Qs aren’t likely billable, and if you’re just studying up for a pitch, hoping to impress a prospective client, those hours may not pay off in any way at all.
Leitch insists the work could very well be worth it. “These documents can be dense, and difficult to wade through,” he said. “But if you really want to understand the world we live in, those are good sources of information.”
Leitch, a former Supreme Court Clerk, Chief Counsel of the FAA, and White House adviser, recently spoke to Big Law Business about some additional ways firms can do their homework on clients, how the Ford legal department has evolved, and the future of the automotive industry.
Part I Excerpts:
That’s one thing an outside counsel can really bring, that broader perspective, because they have clients that are all over the map, literally.
Traditional marketing, like law firm advertisements in various publications that say “We’re different. We create value.”—I think that’s a complete waste of time. I’m never going to hire a law firm based on what I read in an advertisement.
Firms that do their homework, and think not just about themselves, but about you, as a prospective client—those firms are going to be much more successful.
Firms should be able to say, “We studied you. We know what your characteristics are as a company. We’ve learned a little bit about how you’ve handled things in the past, and we think we can help you handle them better, and differently, more efficiently, in the future.”
Below is an edited transcript of the first installment of the interview.
Courtesy of Ford Motor Company
Big Law Business: You’re one of the longest tenured general counsel we’ve talked to. What are the biggest changes that have taken place at Ford under your leadership? What has changed about the legal department’s relationship with outside counsel?
Leitch: As for the biggest changes in the legal department, I would say there are two. First, we’re significantly smaller than we used to be. As part of our restructuring in 2006 to 2009, or thereabouts, Ford underwent some head count reductions across the board, particularly here at the corporate headquarters.
My office participated in those reductions, like every other office, and we shrunk rather significantly — I would say 35 to 40 per cent from the beginning of that period until we settled down. We’ve grown a little bit since then, just filling in some gaps that we perceived in some new practice areas, but we’re a leaner organization.
The second major change in our office has been in the globalization of the organization. I don’t mean we’ve necessarily added attorneys in places where we didn’t have them before, but we’ve knit together the organization to function more globally as a unified whole.
We have much more interaction, both physical and virtual, between attorneys in different regions. We work together on projects. We have “centers of excellence” across various regions and countries. We’re a much more unified organization.
Of course Ford was always a global company. We’ve been in Argentina for a hundred years. We’ve been in England for a hundred years. We’ve been in a lot of places for a long time.
But the company has increasingly operated under the mantra of “one Ford,” and as a global enterprise, rather than as a company with different divisions in different places around the world.
We’ve done the same thing with our office of general counsel and our practice. It’s been very helpful, especially as we downsized, to be able to share the expertise and experience of attorneys from all around the world in a much more free and open way.
Big Law Business: As you probably know, when we talk to other GCs, corporate legal departments are getting bigger, not smaller. Do the unique pressures on the auto industry account for why you’re different?
Leitch: Obviously we’ve had some unique challenges because of our industry, but I also think there have been a lot of changes in the way that in house legal operations function more broadly. I guess the reason for changes here have been a combination of those two.
We would have continued to undergo changes, even if we were in a robust and growing industry. We always have to identify new practice areas and new risks, and figure out how to direct our resources to meet those. There’s always going to be change.
Our change was perhaps amplified and different because of the restructuring our industry was going through. I don’t think we were unique in having to change.
Big Law Business: But the change is usually in the other direction. Was running a leaner legal department something that was philosophically driven or market driven? And did it require you to rely more on outside counsel?
Leitch: I think we became leaner because we had to, but we also became more efficient. Interestingly, as we became leaner, we didn’t really rely more on outside counsel. What we did was find ways to do things more efficiently, more creatively, and obviously, in some respects, we also worked harder.
Cutting people and using more outside law firms would have been counterproductive, in terms of the overall budget. We improved by reducing our staff, identifying new ways to be efficient, and identifying things we didn’t need to be doing, things that we did simply because we had always done them.
At the beginning people were saying, “How are we going to do this with fewer people?” At the end they were saying, “You know what? This has actually worked pretty well. We’re more efficient, and getting better value. We’re a lean organization, but we’re still getting the job done.”
Big Law Business: A 35 to 40 per cent decrease in the size of the legal department is obviously is significant. Maybe give one or two examples of things you had done in the past that you were able to cut out.
Leitch: We tried to find situations where we were doing what effectively was commodity work for internal clients, work we could hand off to them with some supervision and guidance, instead of us doing it every time.
Nondisclosure agreements are a simple example. Rather than have everybody who’s talking to somebody about a potential transaction call us and have us independently make sure that we understood their entire situation, we came up with templates that cover 95 percent of the risk.
You end up taking a little bit more risk in some places, but it’s managed risk. You can make certain things more routine without necessarily having the involvement of a lawyer on a day to day basis.
Big Law Business: What are the areas where you rely on outside counsel? And what are the three or four firms you do the most work with?
Leitch: We rely on outside counsel for litigation, although we do have a heavy component of managing litigation from inside the company. We don’t just hand off a case to a firm and have them talk to us when there’s a decision point. We’re pretty active in the management of the cases. That’s a place where we use a lot of outside counsel.
Then there is the transactional and SEC work we do from time to time. We use outside counsel for that, although, again, we have a pretty good in house expertise on these things. We don’t need to run to outside counsel every time we get an SEC question, for example.
After those two areas, it’s a bit of a grab bag, maybe more of an episodic thing, where we might need expertise we don’t have in-house, or a perspective from somebody who’s dealt with a regulator or a specific problem before.
That’s one thing an outside counsel can really bring, that broader perspective, because they have clients that are all over the map, literally. They can say, “We’ve seen this at four other companies—here are the issues and our recommendations based on that experience.”
What firms do we use? Two of our biggest firms for litigation, for product liability litigation, are Snell & Wilmer and McGuire Woods. We also use Gibson Dunn for labor matters, appellate work, and some other things. We’ve used Hogan Lovells on a number of different matters, including some significant transactional work. Davis Polk has been an important outside firm for us for a long time on a number of different issues. Kasowitz has done a lot of really good work for us recently.
Big Law Business: How do you feel about law firm marketing? What works with you? How could a firm add their name to that list?
Leitch: Traditional marketing, like law firm advertisements in various publications that say, “We’re different. We create value. ” — I think that’s a complete waste of time. I’m never going to hire a law firm based on what I read in an advertisement. Some of them are clever, some of them are visually attractive, but they don’t really move the needle at all, as far as I’m concerned.
We also get a lot of law firms that want to come to us and pitch us, either for a specific piece of business, or just to establish a relationship. We appreciate that, but it does have limited utility, particularly when it’s just an effort to establish a relationship that doesn’t exist.
I usually tell firms we’re happy to sit down and meet with them, but that there is no specific engagement on the table. If they just want to come in and visit us, you never know what it might lead to. But there’s no promise of any return on taking that trip.
Firms are usually perfectly happy to come with that understanding. They want to create a relationship. I get that. But frankly, what really works is having the relationship. It’s a combination of the relationship and some expertise that we need or need to supplement.
Big Law Business: A common complaint about those law firm pitches is that firms come in and talk about themselves, about what they can do, but aren’t so good at talking about the prospective client and the prospective client’s business. Do you agree with that assessment? If so, what are some practical suggestions you have for firms?
Leitch: There are certainly firms that come in and just tell you, “We can do this, we can do that.” That’s standard, and they’re comfortable talking about their capabilities. I get that.
But I think you’re right that firms that do their homework, and think not just about themselves, but about you, as a prospective client — those firms are going to be much more successful. Firms should come in and say, “We see certain things about your business model that create certain legal risks,” or “There are certain things we’ve noticed about your intellectual property.”
Firms should be able to say, “We studied you. We know what your characteristics are as a company. We’ve learned a little bit about how you’ve handled things in the past, and we think we can help you handle them better, and differently, more efficiently, in the future.”
How do you get to that level of knowledge if you’re a law firm? Of course you do your homework, but what is the homework? One things firm should really should do is listen to our earnings calls. There’s a lot of rich information in there.
And read our SEC filings. There’s a lot of information about the business in there, too — information about how we think, how we’re organized, and what our risks and challenges are. It’s all laid out in publicly available documents. These documents can be dense, and difficult to wade through. But if you really want to understand the world we live in, those are good sources of information.
Then of course there is press about what’s going on in the industry in general, what’s going on with your regulators, what’s going on with your company in particular.
In short, there’s no lack of information for firm lawyers who wants to put themselves in the shoes of a lawyer at Ford Motor Company. Firms should ask what kinds of things they would be worried about if they were in our shoes.
Part II of the David Leitch series will include: Leitch’s thoughts on what’s unique about the Ford legal department different, the crisis-management lessons he learned as Chief Counsel of the FAA on 9/11, and his relationship with Chief Justice John Roberts.