Page 16 - CCCA Magazine Winter 2017

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“ We are all under pressure and
therefore the impetus is to go
shake the tree and see if any
money falls out.” your job does not convert you from a cost center to a proft cen-
ter.” He adds that chasing down wrongdoers can actually disrupt
Dan Fitz, General Counsel and Corporate and distract an organization, not to mention increase the risk
Secretary, BT Group of claims against the company. He thinks legal departments are
better off focusing their efforts on “becoming a competitive ad-
vantage” by reining in costs, reducing spending per lawsuit and
“Some of these recoveries were quite large,” he says. For in- maintaining or reducing existing risk.
stance, there was a US$30-million recovery over a power outage Ottawa-based legal consultant Jordan Furlong, author of
that shut down production. Many were also routine, such as Law is a Buyer’s Market, also has apprehensions about corpo-
overbilling, being charged improper taxes, delivery of defective rate law departments that focus on revenue generation. He
goods and accident claims. notes there are two revenue tranches at play: one is stopping
It’s been a proftable venture for DuPont. Between 2004 and or preventing revenue leakage through loss recovery programs,
2014, the loss recovery program brought in US$2.7 billion dol- and the other is generating fresh revenue.
lars. It wasn’t just in the U.S.—as much as 30% of recoveries He’s more concerned about the latter than the former. “If
come from other regions, including Canada. Moreover, he says, you are saddling in-house counsel with sales responsibility, you
the cost of recovery was about 10%. Interestingly, he adds, the put them in a diffcult position. Inevitably, there is going to be
loss recovery program built a stronger bond between the legal some confict arising in their role as sales generator and their
department and business units. role as risk manager and legal issue handlers. You create the po-
“The more the general counsel is tuned into the overall op- tential for unhealthy horse-trading.”
eration . . . the more likely they are to want to get into a loss Mostly, though, he thinks it “misconstrues” the role of the
recovery program,” suggests Jay Fastow, a partner in Ballard legal department, noting there are thousands of people in a
Spahr’s loss recovery service. “They see it as enhancing the company whose job is to focus on revenue. “There is only one
whole business.” person whose job it is to keep the company from shooting itself
Long viewed as a cost centre, legal departments around the in the foot,” he says, and that’s general counsel, whose mission
globe are now being eyed as a place that can actually generate or purpose should remain risk management. “I think it mud-
revenue and—some suggest—become a proft centre. dies the waters.”
Avigilon’s Schuster, however, doesn't think potential conficts
on the FlIp SIDe should preclude legal departments from pursuing revenue-
generating opportunities. In the event that a dispute arises be-
tween the company and a supplier or customer over a patent
It’s a controversial proposition, and one that is spawning debate license, he says, the company will “fgure out the best path for-
in legal circles. ward and take that path.”
Proponents ask what’s wrong with legal departments and law- BT’s Fitz adds that concerns about conficts are “valid criti-
yers getting more involved in revenue generation and trying to cisms” and “we discuss them routinely.” However, he notes, the
move the needle on the notion that the legal department is a cost potential for confict is a daily occurrence in business. “I am not
centre? After all, most companies that lawyers work for exist for sure it’s a real criticism in and of itself.”
one real purpose—to earn proft for shareholders. Why should
the law department not be a bigger part of that equation?
Critics, however (and there are many), worry that by focus-
ing on profts, legal departments are missing the boat and actu- “ it’s a much more business-
ally increasing corporate risk, something that legal departments oriented approach,” and she
are traditionally called on to reduce. questions if legal departments
In a March 2017 issue of Seytlines, a publication by Sey-
farthLean Consulting LLC that looks at the changing practice have the right skill set and are
of law, Kenneth Grady, a lawyer and adjunct professor at the ready for such a step.
Michigan State University College of Law, writes that it’s time
to “stop with the proft center nonsense,” calling it a “bad idea.” Silvia Hodges Silverstein, Executive
In a takedown of proft-centre proponents, Grady discounted Director, Buying Legal Council
the concept, suggesting that “strange as this may seem, doing

16 CCCa MaGazine | WinTer 2017 hiVer