Governance issues putting the heat on in-house counsel. (Who's Who Law - In the Eye of the Storm).

BEING in-house counsel at a public company used to be relatively cushy: regular hours, no worry about billings and the security of dealing with a single client.

But the past 24 months have seen general counsels caught in a swirl of not-so-pleasant responsibility, whether from shareholder suits following a plunge in share prices or increased regulatory, Congressional and law enforcement scrutiny.

And with the demands of last year's Sarbanes-Oxley Act, in-house counsel have been put in a new spotlight as they draft new compliance procedures and policies.

"The demands on my time are growing," said Dan Fisk, vice president, general counsel and secretary of Computer Sciences Corp. in El Segundo. "I'm in my office by 7 o'clock nearly every morning and rarely am able to extricate myself until after 7 in the evening. Certainly the corporate governance matters have further exacerbated those demands on a general counsel's time."

In many ways, a general counsel's role is far different from that of counterparts from private law firms. Depending on the culture of the company, a general counsel can be more of an administrator and executive than a practicing attorney. While transactional work is largely handled in-house, litigation is more often doled out to law firms, since cases can arise across country--or around the world--and companies must rely on attorneys who know the ins and outs of each local courthouse.

Still, how legal matters get handled is ultimately the domain of the general counsel, including matters related to the top executive officers and directors. For each new requirement--whether it's options grants to officers, the composition of a board or audit committee procedures--it is the general counsel who must create a policy that adheres to the changes.

Frederick Krebs, president of the American Corporate Counsel Association, said corporate governance issues have been "all consuming" during the past year, increasing pressure on in-house attorneys.

Watching bottom line

For Wayne Lovett, executive vice president and general counsel of Mercury Air Group Inc., that means spending extra time keeping abreast of the latest regulatory requirements. He no longer reviews corporate contracts, instead farming work out to his assistants. He also is shifting some transactional work to outside law firms.

But as an officer and a shareholder, Lovett has to watch the bottom line--especially in an economic downturn. He said he asks outside law firms to use an associate/partner team to do his legal work instead of two partners.

"It's a continual battle of how you staff your litigation, how you staff transactional work, whether you use a partner or an associate or a paralegal," Lovett said.

Since corporate law departments are not profit centers, they increasingly have been held accountable for costs they incur, including the billable hours run up by outside law firms.

"As in-house counsel, you really have to focus on what your ultimate business objective is," said Arnold Peter, a partner at Lord Bissell & Brook who was vice president of legal and business affairs at Universal Studios from 1994 to 1999. "Even though you're rendering legal advice, you have to look at it from the prism of a business executive?'

For instance, an in-house attorney has to consider how much a legal decision will cost, what it will mean to the business if he loses a case and the effects of adverse publicity. At a private law firm, by comparison, the main objective is to win a case.

To justify a legal decision, in-house counsel must also be a salesman to the various company departments that will be affected, Peter said. The finance department, for instance, might want aggressive motions to be filed in a lawsuit, while the public relations department might want to settle quietly to avoid negative publicity.

"To a great extent, you have to be concerned about politics," Peter said. "Once you reach a particular decision as to the best interest of the company, whether in a transaction or litigation, you need to sell that concept to different people with different objectives."

Those politics, when combined with the professional responsibilities of an attorney, have become more evident with SarbanesOxley, which contains more stringent reporting requirements, particularly as they relate to actions of a company's senior executives and board members.

That can put general counsel, whose salaries come straight from company coffers and whose stock holdings increase in value when the company does well, in a tight spot. (Perhaps it's not surprising that relatively few corporate counsels selected for this year's Who's Who Law would talk to the Business Journal.)

"If you're a general counsel, you serve one client and your objectives are to protect that client," said Howard Weitzman, a partner at Proskauer Rose LLP and former executive vice president of corporate operations at Universal Studios who oversaw the legal department. "That client happens to be your employer, so it's not quite as arms-length as if you were in private practice representing a client."

Compensation fluctuation

Still, if in-house lawyers become aware of fraud within a company, their professional responsibility is to report it to the board.

"The task of having to deliver news to people who don't want to hear it is a really challenging one," said Roxanne Christ, a partner at Latham & Watkins LLP who had been an in-house attorney at Atlantic Richfield Co. "It takes guts and skill. It would be silly not to pay people well for that."

Many general counsel have seen their compensation increase over the past few years. When stock options and increasing share values are counted, some make more than a typical private attorney at a law firm.

One local example is Christi Sulzbach, chief corporate officer and general counsel at Tenet Healthcare Corp. A graduate of Loyola University Law School, Sulzbach has been under the gun in recent months ever since Santa Barbara-based Tenet became the subject of a federal probe of Medicare billing practices. After the stock tumbled upon news of the investigations, there were several shareholder suits filed.

For all this, Sulzbach does quite well: a salary last year of $426,000 plus a bonus of $951,700. In addition, she cashed out $7.25 million in stock options in 2001, making her the 18th highest paid general counsel in the country.

Her compensation far exceeds some of the highest paid private law firm partners, who average about $1 million in annual profits. Sulzbach did not return calls.

While corporate counsels know heading into the year what their salary will be, fluctuating stock prices can make the compensation at a law firm a more stable proposition. Sulzbach, for instance, was granted 187,500 shares in 2002 that would have been worth $9.8 million given Tenet's 52-week high of $52.50. Now they're worth closer to $3.2 million.

"I think if you look at base salary, you're better off being a partner at law firm," Peter said.

What's more, opportunities for advancement are limited, since there is one senior general counsel position.

So what are the plusses? Many say it's the chance to become immersed in an industry and line up clients for an eventual return to private practice.

There's also the nature of the practice.

"You're within an organization, you're responding proactively, you're judged by the quality of your advice and not billable hours, and you're part of a team that is trying to build an enterprise," Krebs said. 'That's not to say there aren't some real challenges and difficulties and professional dilemmas. But by and large, businesses have recognized the value of having an in-house attorney. And they've made use of them in strategic ways."