Corporate Counsel: Going electric
As general counsel of General Electric, Brackett Denniston heads up a legal function of 1,000 lawyers. The skills required to take on such a role make him the perfect chairman for Legal Week's forthcoming Corporate Counsel Forum in Paris. Ahead of the event in May, he talks to Ed Thornton about how he has shaped his role at GE and why European heads of legal still have a lot to learn from the US model
March 15, 2006 at 07:03 PM
9 minute read
When Brackett Denniston was asked by a head-hunter if he would be interested in a job at General Electric (GE) his reply was swift and curt. "I said, 'No, I really wouldn't be interested'," he recalls as he sips tea in a Hertfordshire hotel.
Living a contented life in Massachusetts working as chief legal counsel to state governor William Weld, Denniston felt little urge to move himself and his family to GE's base in Fairfield, Connecticut, where the company wanted him to take up the role of senior counsel for litigation and legal policy. The next step he envisaged for himself was a return to private practice in Massachusetts.
Characteristically persistent, the head-hunter invited Denniston for lunch. At the end of the meal he asked if Denniston would consider meeting Ben Heineman, GE's revered general counsel.
Denniston continues his recollection: "The head-hunter said, 'Everybody in your profession waits in line to see Ben Heineman'. I said, 'Well, that is true, how can I say no to that?'
"I was charmed at each successive step until I found myself in [GE chief executive officer] Jack Welch's office and he said 'What do you think?' I said, 'Well the job looks great, but I do not want to move'. He gave me this look that only Jack can give you. He was astonished to think that anyone would not regard coming to GE as the best thing ever. That is because Jack was – and is – a great salesman."
Denniston eventually accepted and in 1996 joined GE, one of the world's largest companies with 300,000 employees, as senior counsel for litigation and legal policy with responsibility for all of the company's dispute resolution and compliance.
When Denniston embarked on his legal career, he certainly did not envisage himself joining the legal ranks of a multinational blue chip company.
He says that, among his fellow students at Harvard Law School and his colleagues at Goodwin Procter & Hoar in Boston, where he was an associate and then partner, "companies were not the normal avenue to go down".
But then Denniston says he has always shirked from drawing up detailed career plans. "My approach to any job I have ever had is to come in, do the best job I can, evaluate the job and see what I think needs to be done," he explains. "I think it is foolish for any professional to 'game', in some way, their career. Do your job well and good things will happen to you." He pauses, before adding, with a laugh: "Most of the time."
As GE's head of litigation, Denniston drew praise for developing pioneering methods for spotting and resolving potential disputes.
In 1999 he helped establish the Early Dispute Resolution (EDR) programme, which allowed GE to spot litigation risks early and so minimise costs.
"The US has continued to become more litigious. There are more big cases between companies, particularly in intellectual property and in what might be called plaintiffs' work: class actions," he notes. "But the ultimate point is that, notwithstanding that more litigious environment, GE has less litigation now than it had when I joined. That does not mean it does not have plenty [of litigation], but that is the state of affairs of global companies."
Denniston firmly believes in-house lawyers need to be substantially involved in the litigation their company faces rather than simply relying on the expertise of external lawyers.
"You cannot manage litigation well by confining your litigation job to having a good Rolodex and picking outside lawyers," he argues. "If you are not personally substantially involved, if you do not know your case as well as your outside counsel – or better than your out-side counsel – you will not manage it as well."
Denniston is also a strong advocate of alternative forms of dispute resolution – especially mediation.
"Mediation is by far the most successful mechanism to resolve cases," he says. "It has the highest success rate in resolving cases and it also has the highest satisfaction rate. People walk away from mediation more content with the process than with, say, arbitration."
During his seven-year tenure as senior counsel for litigation and legal policy, he established a close relationship with the then general counsel Ben Heineman.
"I have learned a great deal with him, many lessons. From the way one handles difficult situations and people, particularly this idea that you try to add to any conversation," he says.
When Heineman announced he was to step down from the general counsel role in 2003, it prompted feverish speculation among the US business community as to whom his successor would be.
As Heineman's right-hand man, Denniston's name was mooted as an obvious contender for the job. But he insists that he did not take the prospect of a promotion to the top spot for granted. "It was really quite out of the blue – one day I was told, 'You are going to become the general counsel'," he says. "I was utterly surprised."
While some expressed surprise that a litigator – rather than a commercial lawyer – was chosen for the job, other commentators pointed out that it was precisely Denniston's track record in compliance and his untainted reputation that made him a logical choice of general counsel in the post-Enron US corporate environment. Indeed, he had chaired GE's compliance board since 1999 and his CV included stints as a white-collar crime prosecutor at Goodwin Procter and head of the economic crimes unit of the US attorney's office in Boston.
Since becoming general counsel in January 2004, Denniston has continued in his role as chair of the company's policy compliance review board. He considers it logical, and beneficial to the company, that the legal and compliance roles are merged.
"The way it evolved at GE – and I think it is the right way for us – is that the compliance role and the general counsel role are one," he says, adding in typically modest fashion that his successor as litigation head and his colleagues "do the hard work".
"Some companies have a separate compliance head, and you can debate that, but I think that it is better – at least for us – to have law and compliance combined, because they intersect so much. They are all about law, reputation and investigation."
Denniston argues that US corporate scandals such as Enron served as a painful wake-up call on the need for compliance procedures to be embedded in companies.
"Now companies understand that you cannot just publish a code of ethics and have one person who teaches compliance. You have to have it embedded in your culture and practices.
"I always say Enron had the prettiest code of ethics that you could find. It looked nice, and everybody saluted to it and purported to observe it, but it was not a value that went into its culture."
Does this focus on compliance risk antagonising the general counsel's relationship with the CEO and board? Denniston thinks that might be missing the point.
"The general counsel has to be a counsellor, not a cop," he says. "The general counsel helps bring compliance out, but the place where it becomes most effective is where the CEO and other senior leadership lives it, breathes it, talks it and executes it."
GE's in-house legal department has also drawn attention for the innovative methods it uses to manage external lawyers.
Denniston comments: "I thought that we should refocus on the quality of counsel and how we select counsel. It is a skill and an art and, to some degree, even a science. And it should not be approached in my view simply by looking at your electronic Rolodex and see who you know and pick a lawyer – anybody could do that. I could go to Chambers and pick a lawyer, but that is not a process."
Denniston took the view that a more sophisticated and rigorous selection process was needed and adopted the GE Select programme to make the selection procedure more process-oriented.
The company also implemented an online auction process whereby advisers bid for individual projects and were able to see what rival firms were bidding.
Denniston admits the process caused some misgivings and discomfort among firms but adds: "At the end of the day we were not trying to find the lowest-cost firm necessarily – although sometimes we did and they were very good firms. We were trying to see what effect open competition would have – and sometimes it has a pretty good effect."
GE's management of external lawyers, as well as its own legal function, has received much attention among European general counsel, a group Denniston believes is growing in importance and prestige. "I think in general in Europe the role of general counsel has not been given the importance that it has in the US – but that is changing," he says. "There has been a tendency in some respects to treat the job as narrower. I believe the better model by far is having the general counsel as the person with great responsibility for reputation and integrity – what others have called the 'lawyer-statesman'."
And Denniston is certain that one of the key issues facing general counsel and their companies over the coming years will be the continued onslaught of regulation. "That means you will see more scrutiny, more in the way of regulation. That will not change, regulation will increase and not decrease," he says.
But Denniston's experience also tells him that there will be major developments in the world which are at this moment impossible to foresee.
"No-one sitting in my seat in 2000 could have said, 'well I think Enron will happen and I think 9/11 will happen'," he says. "History teaches us that in five years you will have some very dramatic occurrences. But what they will be, I cannot tell you."
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