April 2, 2015
By Ryan Boutet, Senior Editor
Organizations and how they are managed have changed substantially over the course of American history. This Post is intended to serve as a comment on how those changes have affected one particular type of professional: the in-house attorney. Part I seeks to explain the historical trends of these changes and argues that the degradation of the role of in-house counsel in the mid-20th century was perpetuated by the use of the control model of management. Part II describes the now-popular organizational commitment model of management and illustrates that the rise of the general counsel in the modern era has been characterized by organizations’ adoption of that doctrine.
I. The Historical Role of the General Counsel
As corporations have evolved over the course of the last 200 years, so have the roles that corporate counsel play in those organizations. As one professor has noted, the “star of in-house lawyers” has risen and fallen over time.
A. Mid-19th Century to Early 20th Century
In the second half of the 19th century, corporate legal jobs were highly desirable. Positions with railroad companies, for example, were considered to hold great prestige and offer tremendous salaries. Until the late 1930s, the general counsel of an organization was generally paid at a rate that equaled 65% of the CEOs pay, but “more importantly, he . . . was usually one of the three highest paid individuals in the company.” Moreover, during this time period, opportunity for advancement outside of the legal department for subordinate lawyers was ample, and eventually, in addition to purely legal jobs, lawyers who began their careers as in-house counsel tended to dominate senior corporate managerial positions. For illustration, 75% of the CEOs of what were considered to be the “major companies” of the first few decades of the 20th century were lawyers. Today, the number is closer to five percent. Scholars have referred to this period as “the golden age of corporate counsel.”
B. Mid-20th Century
As times began to change, so too did the role of the in-house corporate counsel. Low levels of government regulation made financial transactions less complex, and business school graduates began to take hold of corporate America. Fewer and fewer senior managers saw the need to devote large amounts of resources to corporate law departments, which led to decreased compensation and advancement opportunities. As such, highly qualified and talented lawyers began to seek positions at outside firms.
As corporations still needed competent representation—and law firms needed revenue—these outside firms began to court companies for legal services, which led the prestige of in-house positions, as well as the number of corporate legal positions available, to plummet. The situation was perpetuated by the fact that as companies performed less of their own legal work, their legal resources—statute books, case-law reporter books, and law libraries in general—became out of date and created barriers to entry, making law firm lawyers “the gatekeepers of legal knowledge.”
Although the number of in-house legal departments decreased substantially during this time, the lawyers that remained had their roles dramatically changed. First, they became primarily liaisons between management and outside counsel. As Professor Daly notes, “for a considerable period of time in recent history, general counsel functioned essentially as conduits between corporate clients and the outside law firms. Their status was that of middle management.” As such, the in-house legal departments became cost centers rather than value creators. Even Carl D. Liggio, Sr., one of the more renowned and respected chief in-house lawyers of his generation, characterized those holding the position as ill-equipped to create value:
During the 1960s and 1970s . . . the corporate counsel role was deemed a parking pace for those associates who couldn’t make partner. They would be placed with their corporate clients and, in exchange . . . the law firms expected loyalty of their former associates in the form of business that would be channeled back to their former employers.
As the lawyers who retained their corporate jobs lacked expertise and the resources necessary to handle increasingly convoluted and specialized transactions, their responsibilities “were confined to corporate housekeeping and other routine matters.”
One might argue that this era was characterized by what management experts call the “control model.” The “control model” is a management strategy that was utilized primarily during the early part of the 20th century, which focused on the job in a top-down approach where work was split into small, fixed jobs for which workers could be held accountable. As in-house lawyers were seen as unable or unfit to participate in the management of their own roles within the organization, they were given menial tasks as middlemen and were left to handle only routine legal matters. This scenario was perpetuated because it created a reputation within the industry as a job for the inept, which meant smaller salaries and fewer advancement opportunities, leading to qualified lawyers being dissuaded from applying for these jobs when openings were available. A lower skill set and low compensation contributed to the lack of employee motivation typical of the control model. Corporate counsel did not even have the freedom or input to select the outside lawyers they would be working with: they were essentially straw men for their former employers who helped them obtain their job when their opportunities for advancement at the law firm were nil.
C. The Impetus for Change
During the end of the 20th century, corporations began to see the benefit of evolving the in-house counsel role by implementing a management strategy more akin to what is known as the commitment model. This “shift in power” from outside law firms to in-house counsel corresponded with a quadruple in the number of salaried lawyers between 1962 and 1982.
Scholars have pointed to at least three primary factors that they believe were the impetus for this change. First, and probably foremost, the amount of legal fees charged by outside firms has risen drastically over the past few decades. In 1972, revenues from legal services were approximately $10.9 billion. By the end of 2000, this number had increased to nearly $150 billion, and of this amount, nearly 40%, or $58 billion, were commercial legal services. In 1989, a survey compiled by Ernst and Young suggested that 13% of the responding organizations indicated that their in-house capabilities enabled them to reduce their legal bills. These figures alone would likely have compelled organizations to look for a change in the way they were managing these legal departments, but these costs were not rising in a vacuum.
In addition to the rising costs of legal services (and probably also a factor in the increase of those costs), more stringent governmental regulation is a factor that scholars have highlighted in the evolution of the role of corporate counsel. Compliance with these increased regulations made legal issues increasingly more complex and necessitated “corporate client’s need for lawyers who were well versed in all aspects of their clients’ business operations and therefore equipped to advise clients on a daily basis with respect to compliance issues.” Carl Liggio, Sr., has noted that, until the 1960s, only four federal agencies really had an everyday impact on corporate America: the Federal Trade Commission, the Department of Justice, the Internal Revenue Service, and the Securities and Exchange Commission. The “changing nature of commerce” and a “plethora of legislation” from Congress created a “host of agencies” in the 1960s. All of a sudden, four federal agencies became at least 10—many of which had new state counterparts. Some have put the current number of federal agencies that “could affect all aspects of a corporation” at over 80.
The third primary factor has been the recognition by corporations of the value of having lawyers on staff who understand the complexities of the business itself. “Unless you were part of the organization and saw it on a day-to-day basis,” Liggio noted, “it would be more difficult to provide the quality services businesses needed.”Professor Duggin agreed that “familiarizing outside counsel with the details necessary for effective representation required large cash outlays.” Avoiding these expenditures when they are unnecessary and providing a realm of experience and expertise outside the primary business function corporate lawyers generally serve creates value for the organization. Utilizing in-house lawyers allows corporations to have an employee who is “comfortable in the worlds of business management and law, [who] can translate and mediate between the concepts of business risk and the vocabulary of the law.”
II. The Commitment Model
In the commitment model, “jobs are designed to be broader than before,” to “combine planning and implementation,” and “to upgrade operations, not just maintain them.” In this model, “individual responsibilities are expected to change as conditions change, and teams, not individuals, are the organizational units held responsible for performance.” Some management scholars contend that the model is characterized by four principles: clarity, competence, appreciation, and influence.Other scholars have characterized the principles as: (1) identification with the organization’s goals and/or mission manifested as pride in and defense of the organization; (2) long-term membership in the organization and intention to remain in the organization, often termed loyalty; and (3) high levels of extra role behavior, that is behavior beyond required performance. Regardless of how the principles are phrased, they are essentially the same, and they are not watertight compartments but are inter-related.
The need for clarity, or identification with the organization’s goals and mission, was essential to the transformation of the role played by corporate counsel in the 1970s and 1980s. Having to rely on outside counsel that did not understand the business necessitated expenditures simply to get these lawyers up to speed, and the organizations realized that having in-house lawyers on the ground every day involved in both legal and business issues would reduce cash outlays and provide synergy. During this era, in-house lawyers were involved in “any big strategic issue at the heart of the organization,” in addition to providing legal services.
In order to cut legal costs and provide the business synergy that these organizations were hoping for, corporations needed the best and brightest lawyers available. In other words, if counsel were to be involved in strategic decisions, competence was essential. One major equalizer in obtaining the requisite level of competence was the Internet. Prior to this era, it was law firms that had large legal libraries rather than corporations. One commentator referred to the outside firms as being “the gatekeepers of legal knowledge.” The rise of the Internet brought with it LexisNexis and Westlaw—subscription-based online legal research databases that are updated multiple times daily. These services allowed in-house lawyers the same access to information as law firms and lessened what were once extremely high barriers to entry. In addition to this technological revolution in lawyering, corporations were able to attract highly competent attorneys due to their emphasis on work-life balance. Whereas an outside law firm might require an attorney to bill clients for 2,000 hours per year, corporate lawyers do not have to bill their time, allowing them to work only as many hours as it takes to perform their tasks. Although these attorneys are not required to work more than a requisite number of hours per week, many still bring work home with them or work on their days off because of their commitment and the appreciation they receive from the organization.
Appreciation is high with the majority of in-house lawyers. One way that organizations show appreciation to these individuals is through salary. In the modern era, corporate lawyers are being paid close to what their counterparts at outside firms are making, and outside major metropolitan areas these attorneys make more than their outside colleagues. More importantly, the organization’s appreciation of its in-house counsel differs from law firms in that corporate culture allows in-house lawyers “to be judged solely based on their merits and abilities.” As such, many bright and talented young lawyers who lack the ability to be “rainmakers” to the outside firm because of a “lack of the disposition or marketing talent” are attracted to in-house legal practice because their mobility is not limited by an inability to generate new business.
The last and arguably most important principle of the commitment model is influence, which, when combined with the others, leads to high levels of extra role behavior—also known as citizenship behavior. Influence boils down to members of the organization believing that their opinions are not only tolerated but are openly valued. The integration of in-house lawyers into the strategic decision making process is probably the most prominent evidence of influence in the management of corporate counsel. Not only are the lawyers able to provide their input when sitting at the table with their clients, but the organization acknowledges that they benefit when their non-legal employees seek that advice.
Another indicator that influence is high comes from the legal work itself. In law firms, lawyers are obligated to answer to their clients for any particular line-item on the services invoice. A six-hour charge for legal research on a discrete issue may go by unnoticed, or it may be hotly contested and negotiated down and cut in half. However, the client demands that the quality is more akin to the six-hour work product. When corporate counsel are attacking a problem for the business units that they represent, however, they must be even more cognizant of cost. In-house lawyers must evaluate “whether a Volkswagen might be as cost-effective as a Rolls Royce.” The autonomy afforded these employees in making the judgments that they could not afford to assume the risk of not using the “Rolls Royce” approach is highly indicative of the influence that these employees have.
During the 1970s and 1980s, the in-house legal profession underwent somewhat of a renaissance and returned to its prominence of what was once coined as its “golden age.” Although perpetuated primarily by the rising legal costs of an increasingly complex legal landscape, the profession flourished due to senior managers adopting principles that leadership and management scholars refer to as the commitment model. As a result, these professionals have had their roles expanded within these organizations and are expected to collaborate with and provide advice to their business unit colleagues—making the general counsel of the present “more consigliore than just lawyer.”
 S.H. Duggin, The Pivotal Role of the General Counsel, 51 St. Louis U. L.J. 990, 995 (2007).
 Id. at 995 (citing Lawrence M. Friedman, A History of American Law 490 (3d ed. 2005)).
 Carl D. Liggio, A Look at the Role of Corporate Counsel: Back to the Future—Or Is It the Past?, 44 Ariz. L. Rev. 621, 621 (2002).
 Duggin, supra note 1, at 995.
 Liggio, supra note 3, at 621.
 Duggin, supra note 1, at 995. See also Liggio, supra note 3, at 621.
 Duggin, supra note 1, at 995.
 Whereas in the 1930s, the general counsel earned 65% of the CEOs salary, by the 1970s the figure was closer to 30% of the CEOs compensation. See Liggio, supra note 3, at 622.
 Duggin, supra note 1, at 996.
Liggio, supra note 3, at 622.
 Id. at 625.
 During this time, of the Fortune 1000 companies, nearly 25% did not have in-house legal staffs. Today, “almost all such companies have internal legal staffs.” Id. at 623.
 Mary C. Daly, The Cultural, Ethical, and Legal Challenges in Lawyering for a Global Organization: The Role of the General Counsel, 46 Emory L.J. 1057, 1059–60 (1997) (citing Margaret Cronin Fisk, General Counsel Expanding Beyond Traditional Roles, Nat’l L. J. June 21, 1993 at 19, 28).
 Carl D. Liggio, Sr., is the former General Counsel of Ernst and Young and co-founder of the American Association of General Counsel.
 Liggio, supra note 3, at 622.
 Daly, supra note 13, at 1060.
 See William Slaughter, Ph.D., & Christel Slaughter, Ph.D., Address to LSU Flores MBA Program: Seminar in New Developments in Business Administration (Feb. 3, 2015) (on file with the author).
 Richard E. Walton, From Control to Commitment in the Workplace, Harv. Bus. Rev., Mar. 1985, at 77.
 Daly, supra note 13, at 1059.
 Liggio, supra note 3, at 625.
 Daly, supra note 13, at 1060 n.12.
 Id. at 1061.
 Liggio, supra note 3, at 623.
 Of the new federal agencies, the ones considered to have the greatest affect on corporate affairs include the Occupational Safety and Health Administration (OSHA), the Equal Employment Opportunity Commission (EEOC), the Federal Communications Commission (FCC), the Environmental Protection Agency (EPA), the Federal Energy Regulatory Commission (FERC), and the Consumer Product Safety Commission (CPSC). Id.
 Liggio, supra note 3, at 624. Of course, this does not even begin to touch upon the thousands of individual state agencies that a national or international organization is likely to encounter, most of which likely lack uniformity in their regulations.
 Id. at 634.
 Duggin, supra note 1, at 998.
 Howard B. Miller, Law Risk Management and General Counsel, 46 Emory L.J. 1223, 1223 (1997).
 Walton, supra note 18, at 77–78.
 See Slaughter & Slaughter, supra note 17.
 Richard W. Scholl, Ph.D., Organizational Commitment, Labor Research Ctr., The University of Rhode Island (2008), available at http://www.uri.edu/research/lrc/scholl/webnotes/Commitment.htm, archived at http://perma.cc/H73M-U5E6.
 Daly, supra note 13, at 1066.
 Id. at 1060.
 Liggio, supra note 3, at 625.
 Id. at 633.
 Id. at 628.
 This number is based upon information conveyed to the author over the course of numerous interviews with employers, colleagues, and career service professionals. Although 2,000 hours seems like an extremely manageable number if every hour worked was an hour billed by the attorney, most attorney find the ratio of hours billed to hours spent at the office to be between 0.66–0.75. Therefore, to bill 2,000 hours in a year (if no vacation time is taken), an attorney must work between 51 and 59 hours per week. If two weeks of vacation are taken, the range is then between 53 and 60 hours per week.
 In Houston, Texas, the baseline hours for a salaried lawyer are based on “9/80s.” This means the attorney works 9 hours a day for 9 days of the pay period and takes the 10th day off.
 Liggio, supra note 3, at 628.
 See Slaughter & Slaughter, supra note 17.
 Liggio, supra note 3, at 631.
 Id. at 635.