As was the case last year, the Committee has reached unprecedented activity levels, attempting to bring new and improved services to our members.  This Newsletter is just one of the services we offer, and we hope you take advantage of this and other offerings.  We welcome greater participation by our members.

Much has happened since our last Newsletter in August.  We survived another successful ABA Annual Meeting and put on a host of well-attended programs.  We welcomed both an Ambassador and a Section Fellow to our ranks.  Please welcome our Ambassador from Arizona, Mari Valenzuela, Corporate Counsel with Microchip Technology, Inc., and our Fellow from Texas, Suzanne Bailey, Senior Staff Attorney with HEB Grocery Company, L.P.  For more information about the Business Law Fellows and Ambassadors Programs, please contact Nhu Ly.  In addition, some of the Committee leaders attended a successful Mid-Winter Council Meeting, and gained insight on how we can better serve you.  Expect some new programs and offerings to roll out over the next year.

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David Williams, II
Committee on Corporate Counsel, Co-Chair

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In an effort to improve retention rates and the quality of the workforce, companies are increasingly utilizing pre-employment personality testing as a part of their hiring practices. These tests also help companies reduce exposure to negligent hiring claims.  

Personality tests are designed to try to predict job applicants’ productiveness, drive, work pace, reliability, trustworthiness, and propensity to engage in other negative conduct in the workplace. Example questions include those below:

1. There have been times that I have cheated on a test or examination.
2. I am usually unexcitable, leisurely, and easy-going.
3. I sometimes find it difficult to change old habits.
4. Whenever I make a mistake I am always willing to admit it.

While some pre-employment personality testing may provide a company with insight about a job candidate’s disposition, employers should proceed with great caution when utilizing such tests to ensure that they are not violating the Americans with Disabilities Act.

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The Sarbanes-Oxley Act of 2002 (“SOX”) contained the most sweeping revisions to United States securities laws since they were enacted in the1930's.  The revisions, aimed at protecting investors by improving the accuracy and reliability of corporate disclosures, include provisions that impose criminal liability and personal financial liability on public company officers, directors and counsel whose conduct runs afoul of the act.

Although heralded as a cure-all for the spate of corporate scandals that burst into public consciousness commencing with Enron's implosion, there is a perception that SOX, while replete with procedural mechanisms, has little substance.  That perception is supported by the fact that, in the two years since its enactment, there have been very few reported decisions citing SOX.  Of those cases, only four of them concern bankruptcy issues.

The reported decisions citing SOX have altered the practice of bankruptcy law by (i) expanding the scope of nondischargeability actions, and (ii) slightly modifying the Bankruptcy Code’s distribution scheme.  Based upon the paucity of reported decisions and the nearly imperceptible impact of those decisions upon the practice of bankruptcy law, it appears that the impact of SOX will be limited to the corporate governance arena.  In addition to a brief discussion of the few cases interpreting SOX, this article will also touch upon a couple of other areas of bankruptcy law that could be indirectly impacted by SOX and its increased scrutiny of the acts of corporate insiders.

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The European Commission (the “EC”) recently completed a proposal for a directive on statutory audits of annual and consolidated accounts.  The proposed directive is currently under review by the European Parliament, the Council of Ministers, and the various ministries of the member states.  In general, the proposed directive is a logical consequence of the reorientation of the European Union’s (“EU”) policy on statutory audit that commenced in 1996.  It has been influenced by the recent examples of corporate fraud in the United States and the EU, such as Enron, WorldCom, Parmalat, and Ahold.  Such scandals have shown the importance of corporate audits in ensuring the credibility and reliability of a company’s financial statements.  As will be discussed below, the two overarching themes of the proposed directive are:  (1) to combat corporate fraud by ensuring auditor quality and independence, as well as corporate governance reforms; and (2) to facilitate international regulatory cooperation among the EU member states and third countries, in recognition of the increasing globalization of the capital market.


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A reluctance to give bad news which can make the underlying problem much worse.  A good example of this is not informing in-house counsel that it is going to take longer to complete a project than originally contemplated, and failing to let you know until after the expected delivery date has already passed.  This leaves in-house counsel in the uncomfortable position of trying to explain to clients why you can't deliver work product when they expected it.  The same thing happens with fees exceeding original estimates - law firms frequently are hesitant about raising the issue with you until it's too late and they've already exceeded the budget.  Things often go wrong or at least change in the midst of a project so that initial projections on schedules or budgets need to be revised.  The important point is for law firms to identify as early as possible the need to revise initial expectations and communicate it promptly and clearly to in-house counsel.  It's a difficult conversation anytime, but much harder for both sides when it's too late to take steps to address the problem or work to re-set expectations with the client.

I have a small collection of collapsing toy animals from my wife and an 8-ball I won as a prize at a trivia game during a legal department party.  They are important distractions during long, tedious conference calls, and do double duty in entertaining my two small children when I have to bring them into the office to pick something up over the weekend.

That's changed quite a lot over my 9 years at Microsoft. When I started here, I was traveling a couple of times a month.  Over time, that's gone down considerably, and I would now consider myself an infrequent traveler.  With the reliance on email, conference calls and on-line collaboration technology, the need to travel has been greatly reduced.

Quick trip to Disneyland and San Diego in June.

Generally both, though I try to schedule it for specific times of the day when it won't be disruptive to family time.  I've also been able to manage a couple of vacations where I was able to "unplug" completely.

A recognition by more lawyers of the value of problem-solving skills. Too often, I think, lawyers see themselves as doing the best by their clients by playing incredible defense - protecting against potential liability at the cost of trying to work toward a resolution of issues that address the concerns of all parties. 

What advice would you give to someone in the same situation?

Have a good understanding of the strategic and business motivations that underlie a specific deal.  That knowledge can be incredibly helpful as you work with clients to resolve the many issues that arise during the course of a negotiation.  Knowing intimately what the business clients want to achieve allows you to better formulate your advice and develop a negotiation strategy that is in line with those goals.

What were some of the funny things that happened during that time?

In an acquisition we did outside the U.S. a few years ago, I witnessed the other party's counsel berate his client in front of us, causing her to burst into tears.  After a brief break, we continued on and resolved the open matters.  Only after the deal got signed did I learn that the client, her primary lawyer and his associate were brother and sisters, so the arguments and tears were a regular part of their interaction.

What surprised you?

I am always mildly surprised by how quickly negotiations can drive to a final conclusion in a large public company transaction compared to the often long and difficult negotiations in private company deals.  In my experience at Microsoft, deal complexity is often inversely related to the dollar value of the transaction.

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The Closely-Held Corporations Subcommittee of the Committee on Corporate Counsel was recently established to identify and address issues of interest to in-house legal counsel of closely-held companies. The committee will also develop resources to assist in-house counsel to become more efficient and to benchmark their practices against other comparable closely-held companies.

The committee was established, in part, on the belief that private company in-house counsel are underserved. They typically do not have the resources available to their public company counterparts and publications also tend to focus on the public company legal department. They often do not have the ability to compare or benchmark their company’s legal resources and approaches to issues to comparable companies whether by size of revenues, industry or geographic location. Perhaps even more so than in the public company setting, the private company in-house legal counsel must be very efficient in dealing with legal and business issues and with employing outside counsel.

Many of the private company legal departments consist of a single attorney. The attorney may have developed their relationship with the company from a litigation practice and have limited business experience. Regardless of their prior experiences, they are often asked to apply their keen legal judgment to a wide variety of issues. The subcommittee will provide a forum for the in-house lawyer to discuss issues with similarly situated counsel, compare notes on in-house practice and benchmark against comparable companies.


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*Please confirm room locations onsite as meeting locations may change.

The Inside Track on Getting In-house:  What it Takes to Get Through the Door.
Wednesday, March 30 from 5:00 - 7:00 p.m. followed by a reception
Vanderbilt University School of Law
Moore Room, 2nd Floor

A free program for law students presented by the Committee on Corporate Counsel, the Committee on Diversity, and the Young Lawyer Forum of the ABA Section of Business Law.  This will be a lively panel discussion to learn about in-house practice and the credentials and work experience generally expected for an in-house job, plus what to expect once you're inside.  There will be ample opportunity to pose that age-old question, "How Did You Land That Great In-House Job?"  The program will be hosted by Vanderbilt University School of Law.  Interested students should RSVP to jolene.yee@ejgallo.com.

Committee Forum: Tackling the Publicity Nightmare: Effective Strategies for Managing Communication During Times of Crisis
Friday, April 1 from 11:00 a.m. - 12:00 Noon
Renaissance Hotel
Fisk Room Two, 2nd Floor

Committee Meeting
Friday, April 1 from 12:00 - 12:30 p.m.
Renaissance Hotel
Fisk Room Two, 2nd Floor

Program: Hottest Topics Facing Corporate Counsel Today- Part III
Friday, April 1 from 2:30 - 4:30
Renaissance Hotel
Fisk Room Two, 2nd Floor

Program: Not Another Survey?!? A Fresh and Current Look at Ethics and the World of Corporate Compliance
Saturday, April 2 from 2:00 - 4:00 p.m.
Renaissance Hotel
Fisk Room One, 2nd Floor Cosponsored by the Committee on Corporate Compliance

Committee Dinner
Saturday, April 2 8:00 p.m.
Merchants Restaurant
Advance registration for dinner must be completed online by March 11. You may register for the dinner by clicking here.

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We invite you to contact any of the leadership for questions about the committee's activities.  Contact us for ways you can begin to participate.  Look forward to hearing from you.  To contact any of the leadership, please visit our website by
clicking here.

Jolene A. Yee, Co-Chair
jolene.yee@ejgallo.com
David Williams, II, Co-Chair
david.williams@vanderbilt.edu

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