2007 Leigh Dance The reproduction, modification, or distribution by whatever means of the whole or any part of this presentation (including, without limitation, all images, logos, graphs, charts and quotes) is strictly forbidden without specific written permission from the author.

Systems, Structures & Procedures to Reduce Professional Risk In-house Counsel Liability Session IBA Budapest – March 29, 2006 E. Leigh Dance, ELD International, Bruno Cova, Paul Systems, Structures & Procedures to Reduce Professional Risk In-house Counsel Liability Session IBA Budapest – March 29, 2006 E. Leigh Dance, ELD International, Bruno Cova, Paul

Ten minutes I. Dramatic rise in professional risk for in-house counsel – Why? II. What you can do about it III. Area for improvement: governance in remote subsidiaries I. Dramatic rise in professional risk for in-house counsel – Why? II. What you can do about it III. Area for improvement: governance in remote subsidiaries

The Good News: More respect, more impact, higher compensation Broader risk management role and accountability from executives and boards Surveys show that boards more likely to rely on in-house counsel than outside counsel for advice: governance, process, education Broader risk management role and accountability from executives and boards Surveys show that boards more likely to rely on in-house counsel than outside counsel for advice: governance, process, education

The Good News: More respect, more impact, higher compensation In the past, a CEO might have looked to the senior partner of a law firm as his trusted adviser. The General Counsel increasingly fills that role. - Rosemary Berkery, GC, Merrill Lynch A typical work day for Microsofts GC, Brad Smith: I drop my son off at the school bus and get into work by 7:15am. Steve Ballmer [Microsoft CEO] typically stops in my office at about 8am. We compare notes and often that results in a few additional things for me to address as the day progresses. In the past, a CEO might have looked to the senior partner of a law firm as his trusted adviser. The General Counsel increasingly fills that role. - Rosemary Berkery, GC, Merrill Lynch A typical work day for Microsofts GC, Brad Smith: I drop my son off at the school bus and get into work by 7:15am. Steve Ballmer [Microsoft CEO] typically stops in my office at about 8am. We compare notes and often that results in a few additional things for me to address as the day progresses.

The Bad News: Higher Professional Risk I think the boards view of the legal function has improved – they are very much looking to us to help keep them out of trouble by spotting key issues before they would normally be put to us, and at the same time they are demanding a lot more from us. - Michael Fricklas, GC, Viacom I think the boards view of the legal function has improved – they are very much looking to us to help keep them out of trouble by spotting key issues before they would normally be put to us, and at the same time they are demanding a lot more from us. - Michael Fricklas, GC, Viacom

The Bad News: Higher Professional Risk Every facet of the [pharmaceutical] business is regulated, meaning that corporate strategy is intertwined with legal and regulatory functions of a general counsel. Its not even possible to think of a business strategy without a legal and regulatory element to it. - Ken Frazier, GC, Merck, in Financial Times Every facet of the [pharmaceutical] business is regulated, meaning that corporate strategy is intertwined with legal and regulatory functions of a general counsel. Its not even possible to think of a business strategy without a legal and regulatory element to it. - Ken Frazier, GC, Merck, in Financial Times

The Bad News: Higher Professional Risk looking to us to help keep them out of trouble every business strategy has a legal and regulatory element Each month, another General Counsel is held publicly accountable for his or her companys alleged wrongdoing. looking to us to help keep them out of trouble every business strategy has a legal and regulatory element Each month, another General Counsel is held publicly accountable for his or her companys alleged wrongdoing.

The Bad News: Higher Professional Risk In January 2005 the SEC listed corporate counsel they had targeted, including Warnacos GC, Gemstar-TV Guides former GC, and Googles General Counsel. "We have seen too many examples of lawyers who twisted themselves into pretzels to accommodate the wishes of company management, and failed in their responsibility to insist that the company comply with the law." - SEC spokesman In January 2005 the SEC listed corporate counsel they had targeted, including Warnacos GC, Gemstar-TV Guides former GC, and Googles General Counsel. "We have seen too many examples of lawyers who twisted themselves into pretzels to accommodate the wishes of company management, and failed in their responsibility to insist that the company comply with the law." - SEC spokesman

The head of legals mission is to preserve corporate credibility: judged by quality and reliability of information Help the company keep its promises to shareholders, customers, employees, lenders, suppliers, communities, governments, regulatory bodies The head of legals mission is to preserve corporate credibility: judged by quality and reliability of information Help the company keep its promises to shareholders, customers, employees, lenders, suppliers, communities, governments, regulatory bodies II. What You Can Do About it

Exercise moral courage Question suspicious transactions Encourage business people to report questionable activities or transactions Lead by example: root-out potential wrongdoing Take confessions from anyone: avoid bias Exercise moral courage Question suspicious transactions Encourage business people to report questionable activities or transactions Lead by example: root-out potential wrongdoing Take confessions from anyone: avoid bias II. What You Can Do About it

Strengthen control of legal function In-house lawyers must report hierarchically or functionally to the head of legal Enhance your personal role: it matters to whom you report Direct, unencumbered access to executives and the Board Strengthen control of legal function In-house lawyers must report hierarchically or functionally to the head of legal Enhance your personal role: it matters to whom you report Direct, unencumbered access to executives and the Board II. What You Can Do About it

Know and Control Your Advisers You must have direct responsibility for outside counsel that advise company on key transactions Retain, instruct, manage and pay the bills of the companys outside lawyers Ensure reputation of integrity for the companys outside advisers Know and Control Your Advisers You must have direct responsibility for outside counsel that advise company on key transactions Retain, instruct, manage and pay the bills of the companys outside lawyers Ensure reputation of integrity for the companys outside advisers II. What You Can Do About it

Systems, Structures & Procedures to Reduce Professional Risk In-house Counsel Liability Session IBA Budapest – March 29, 2006 E. Leigh Dance, ELD International, Bruno Cova, Paul Systems, Structures & Procedures to Reduce Professional Risk In-house Counsel Liability Session IBA Budapest – March 29, 2006 E. Leigh Dance, ELD International, Bruno Cova, Paul