Managing Business and Legal Risks

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As Seen in CFO Studio Magazine Q3 2015 Issue

WHY MIGHT YOU NEED AN IN-HOUSE GENERAL COUNSEL?

In 2007, when the global organization Agfa-Gevaert decided to de-merge — splitting into three independent, listed companies representing the activities of Agfa Graphics, Agfa HealthCare, and Agfa Materials — the company initially managed the action using in-house attorneys, according to Gunther Mertens, CFO of Ridgefield, NJ-based Agfa Corp.

“But after the merger, we outsourced some of the tasks to specialized firms as a way of cutting costs and making the de-merger expenses neutral,” said Mertens, one of the experts featured in a panel discussion on “Managing Legal, Regulatory, and Business Risk: A Creative Dialogue Between CFOs and General Counsels (GCs).”The CFO Innovation Conference event was moderated by Christopher M. Santomassimo, a partner at Paramus, NJ-based Nicoll Davis & Spinella, LLP as well as GC of Agfa Corporation.

With regulatory, cybersecurity, and other concerns, CFOs today have more on their plates than ever before, and consequently need to work more closely than ever with their general counsels.

“GCs have multiple roles,” explained William Farran, general counsel of Innophos Holdings, Inc., an international producer of nutritional and other specialty ingredients in Cranbury, NJ. “As outside counsel, [attorneys] fulfill a tactical function, while as in-house counsel we fill a strategic one.”

In-house GCs, for example, work closely with the CFO and other executives on day-today matters, while outside attorneys are often retained for their specialized knowledge in taxes and other matters, he added.

Although outside counsel and in-house counsel may have different operating styles, they can still work in harmony, noted Kevin Fox, GC of Mahwah, NJ–based Sharp Electronics Corp.

“An outside attorney often has a significant fear of appearing to be wrong, so he or she will often issue lengthy, comprehensive memos to back up his or her position on a matter,” he said. “But an in-house counsel is expected to offer quick, though accurate and informed, decisions on important matters. So, they have to be prepared to move fast. Both are vital to the CFO, and they must all share a high level of trust and be able to work together smoothly.”

At Agfa, Mertens has been involved in a variety of financial and other activities. He said a GC “needs to be an excellent lawyer, but also a savvy businessperson who can take complex issues and translate them to manageable bites —without ‘dumbing down’ the concepts — that the CFO can easily digest.”

Smaller companies, like family-owned Berjé, Inc., often look to the inside counsel to deliver a wide range of value-added legal and other services at a reasonable cost, noted CFO Brian J. Hart. Based in Carteret, NJ, Berjé distributes essential oils and aromatic chemicals, and develops and manufactures finished fragrances.

“When I worked at a large firm, we tended to rely on outside counsel for more matters,” he reported. “At smaller firms, we develop expertise in a wider range of matters, including risk management. While [CFOs] consider traditional risk matters, like insurance needs and regulatory developments, the GC is also increasingly asked to weigh in on an expanding number of risk areas. Consider the example of the H&R Block tax services firm: Years ago their big concern was where to locate new stores as they expanded; but the real risk the company faced was relatively inexpensive tax software.” An alert GC might have helped the CFO see beyond that day’s goals. —Martin Daks

 

Bill Hendry – The CFO in Forward Motion

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Bill Hendry, Finance Executive, discusses the CFO in Forward Motion in a CFO Studio Interview with Andrew Zezas.

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