Session #308 – Roadmap for a Successful International Law Department

Monday, October 19, 2015, 2:30pm – 4:00pm

Stephanie J. Bagot Senior Corporate Attorney FINCA International, Inc.

Preston Ray Assistant General Counsel Cummins Inc.

Carolyn Herzog VP, Legal & Chief Compliance Officer Symantec Corporation

Cheryl Solomon Chief Legal Officer TOMS Shoes, LLC

Guest Panelists:

You have just been hired as the new General Counsel of WeeGiant Co. (“WeeGiant”), a late stage start-up based in Chicago. WeeGiant has a “category killer” app that allows people to collaborate on custom pieces of clothing, art and furniture – people can then decide to find a way to produce and sell their work themselves or to partner with WeeGiant which will arrange for the manufacturing, distribution and sale of the custom work through its ever expanding distribution network of both online and brick and mortar stores. Though young, WeeGiant is already generating nearly $1.5 billion in annual revenue.

WeeGiant currently has a legal department of 15 people comprised of eight US-qualified lawyers, one of which speaks some Spanish, and seven paralegals. All of its lawyers currently reside in WeeGiant’s Chicago headquarters and the company has operated solely in the US to date. However, WeeGiant has brought you on board to help guide its global growth. By the end of 2016, WeeGiant expects to have collaborators, manufacturing facilities, and distribution capabilities (both online and brick and mortar), organized around three regions – the Americas, EMEA, and APAC. It further expects to be operating in at least six countries in each region, with physical offices in each country.

Governance - What are the key legal considerations as you grow the legal function?

• What are WeeGiant’s areas of greatest legal risk?• Cross-border IP rights• Corporate Structuring and Tax • Direct to consumer operations in many countries• Employees in at least 12 countries• Where will you be manufacturing? Through whom?• Will you be operating directly or through third party distributors

or operators?

Governance - Are particular compliance issues raised by this particular type of growth?

• Anti-corruption, FCPA risks• Ensure the company has an FCPA policy or a Code of Conduct with FCPA provisions

enforceable network-wide. • Do FCPA training for local attorneys and staff to raise awareness on FCPA issues and

ensure enforcement. • Privacy

• What employee/customer PII• Safe Harbor Certification• Security Standards

• Product labeling/manufacturing requirements• Trade, including customs clearance issues

• OFAC/DOC• Other country requirements

• Regulatory requirements regarding particular goods sold (i.e. pork products, use of restricted substances)

LAW DEPARTMENT MANAGEMENT What legal issues can or should be managed centrally? Which should be managed in-region?

• Are there any redundancies or gaps in your legal staffing? • Do you expect to have routine, repetitive legal work in certain areas?

• Relationships with creators• E-commerce or brick and mortar purchases• Human resources needs for employees in 12 countries

• Do you expect to have discrete projects or issues arise in particular areas?• A new distribution facility in China• Short-term promotional partnership with the Louvre Museum in Paris• Unique product manufacturing requirements

What cultural considerations will you need to consider as you grow the legal department?

• Managing the headquarters/remote office relationship• Which countries would be best to place lawyers?

• Countries with most business operations?• Cultural Communication Style • Countries with highest risk (legal risks requiring subject matter expertise;

local operational/governance risks)?• What language capabilities will the company need?• What time zone challenges are presented?

Other Considerations?

• How will you determine what work is done in-house and what is done by outside counsel, and which outside counsel?• Relationships, budgets, how the work is managed, existing firms, new firms, RFP/converge existing

firms• In-house local counsels qualifications and expertise, needs of the business (e.g., punctual vs.

constant).

• With the rapid expansion, how will you address the diversity and increase in workload? What technology and tools can help?• Understanding the business, tools and investments – technology/software, leveraging existing firms,

RFP/convergence of firms, legal process insourcing/outsourcing.• What processes can you put in place to monitor matters, trends, risks? How often do you plan to do

reviews?• How can you work to ensure a diverse team, with diverse ideas, approaches, backgrounds etc.

• Do you have a plan for business partnering?• Key relationships, align attorneys with segments of business, go-to-market planning, growth

plans

Some considerations for choosing outside counsel in a foreign jurisdiction

• Selection process (recommendations from contacts, U.S. law firms you work with, Chambers, etc.)

• Large multinational vs local firms • Substantive expertise and level of sophistication• Education, training and international expertise• Former regulators, political connections• Communication, language skills, technology • Expectation for timelines, understanding pace of client/transaction• Fees, billing and estimates issues

WeeGiant is not only looking to grow organically but just recently announced that it is acquiring a UK-based company, KustomDesigns.com (“Kustom”), which is about half the size of WeeGiant and is in an adjacent space focusing on custom clothing using a similar business model as WeeGiant. What Kustom lacks in its intellectual property assets, it makes up in its distribution network. Each company’s CEO believes the acquisition will showcase the best of both company’s strengths as Kustom already has manufacturing and distribution capabilities in Singapore, Indonesia, the Philippines, Qatar, Turkey and South Africa. Kustom has three attorneys, including its General Counsel, and one paralegal in the UK. It also has one attorney in Johannesburg and one based in Singapore. All attorneys are generalists.

How do you want to organize your legal team post-acquisition of Kustom?

• Determine Kustom’s legal needs and do your due diligence for better integration• How is the business organized? Business line? Geography? How does that affect

organization?• Potential primary principles of organization – Practice Area? Business Line? Geography?

Secondary? • How does the department use generalist, specialist staff and paralegals? • What are the department ‘s main legal needs (e.g., litigation, IP, etc.?)• Centralized reporting to GC; decentralized reporting• Consider face-to-face meetings and training on company's policies and procedure

• What cultural considerations should you be prepared for?• Relationship, timing, language, local law expertise, position of the legal team/how legal

advice is delivered• Integration of Kustom’s legal team – get to know/train the team

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As part of WeeGiant’s Corporate Responsibility efforts, it has decided to make sure that it provides support to a certain number of collaborations coming from developing countries, in order to help develop skills, job and industries. The initial focus will be on the emerging markets WeeGiant is targeting.

How to best manage the legal resources for Corporate Responsibility and not-for-profit business unit?

• Corporate Responsibility as part of your company Brand• Risk can be just as important as that of IP to Brand’s success

• How do you maximize legal resources while keeping costs down?• Pro bono resources

Major law firms, sites such as Trust Law, grants associated with pro bono advice Pro bono firms management Training your staff/legal teams pro bono

• Show value of the pro bono resources to the business team Keep track of monetary value of pro bono advice/show value to the business team

• When pro bono advice is not available (e.g., tax matter, foreign country with no pro bono concept)

Leverage relationships with firms for discounted or flat fees Limit outside counsel’s involvement to the minimum, monitor legal costs

How do you make the case to the business for a dedicated legal team for this aspect of WeeGiant’s business and for early integration in decision making?

• Educate the business team on risks and legal issues faced in the planned countries• Communicate challenges faced by your department, on legal risks, needs and costs• Explain potential risks if legal not integrated at early stage

• Articulate the value of a strong legal team for those activities to the business team• Legal issues, risks and challenges exist even if not-for-profit activity• Value of a legal team that understands the business

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TAKE AWAYS - Questions to ask to establish a Successful International Law Department

1. Know your business a) B to B? C to B? Regulated industry? b) Direct or indirect through channelc) Corporate – tax, IP licensing d) Employee base e) Vendor management including contingent workforce, manufacturing,

dependencies, redundancies

2. Compliancea) Ethics and Compliance: Anti-Corruption/FCPAb) Privacy: employee/customer, data transfer mapping, privacy by design c) Trade: controlled goods, Manufacturing labelling/registrations d) Other regulatory requirements

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TAKE AWAYS3. Law Department Management & Culture

a) Decision Making – Centralised or In Regionb) Languages and Location, Time Zonesc) Functional alignment: transactions, go-to-market, compliance, corporate, litigation, IP, employmentd) Nature of the work – strategic, high-risk, repetitive

4. Company Culturea) Role of HQ – will acquired company’s HQ change, including regional HQs? b) Building relationships – role of counsel, regional and business unit inclusion c) Functional alignment: transactions, go-to-market, compliance, corporate, litigation, IP, employmentd) Nature of the work – strategic, high-risk, repetitive

5. Outside Counsel/Outside Resources e) What type work allocation? Does any IP sit with outside counsel?f) Recurring or project-based? g) Who selects – local needs, large multinational law firm vs small local firmh) Relationships with regulatorsi) Budgets – predictability, who pays (internal legal budget vs business), how managed (systems/tools) j) Fee management – discounts, alternative fee arrangements, relationship building (i.e. training, share points,

hotline)

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TAKE AWAYS6. Organizing your Law Department

a) Functional and/or regional alignmentb) Benchmarking size and function to industry and locationc) What cultural elements influence the impact of the team and where they sitd) Do you need regional GCs? e) How does the team connect and learn – training, in person meetings,

knowledge sharing resources, memberships (i.e. ACC)

7. Corporate Responsibility and Pro Bono Work f) Is community involvement important to your brand and your employee base? g) Is Pro Bono work involved and how can that be executed? h) Funding and business impact i) Staffing – is this an add on or do you need dedicated resource?

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Thank you!