Putting the Pieces Together

Systemax general counsel Eric Lerner explains why the legal function is really a critical business function

When Profile last spoke with Eric Lerner in 2013, the senior vice president and general counsel for Systemax Inc. discussed his role as in-house counsel after a successful thirty-year career in private corporate law. “For most of my career, I was a nuts-and-bolts corporate, M&A, and securities business lawyer, and though it was not part of any plan, it turned out I had the perfect training to work for a public operating company like Systemax,” he says.

In the past few years, Lerner’s role has expanded to include oversight of all securities, corporate, corporate governance, intellectual property, risk management, insurance, and safety compliance matters across the company, in addition to general oversight of the entire legal team, including human resources and litigation matters. He has also helped lead the company through several acquisitions and sales transactions over the past few years, including large deals in the United States and Europe.

In the process, Lerner has helped transform and deeply integrate the legal team into the business of Systemax, a Fortune 1000 company and leading retailer of brand-name and private-label products, including industrial supplies in the United States and Canada, and computer equipment, related accessories, and technology services and solutions in Europe. With $1.7 billion in sales, the company employs about 3,500 people and serves customers through a system of branded e-commerce websites and relationship marketers. “The key has been using the legal function to drive process improvements in the business and to have emerging business needs shape the legal function,” he says. “If legal can generate cost efficiencies, reduce risk, mitigate liability, and help automate business processes, it’s a win-win for legal and the business.”

Whether it is a new acquisition or a new market the company is entering, Lerner tries to get the legal team involved with the business decisions from an early stage to lend as much help as possible, to troubleshoot, and to get ahead of issues that might arise—legal or otherwise.

“It’s always been my view that there is no such thing as a ‘legal issue.’ The resolution of most legal issues is that eventually somebody has to write somebody else a check or the company needs to incur compliance costs or deal with a proceeding,” he says. “Just about every legal issue is really a business issue or economic issue in waiting. Its legal’s job to get in front of those and prevent them from happening or to mitigate their effect on the business in the first place.”

The company’s entire risk management function—including worker’s compensation matters, all forms of insurance, facility safety, OSHA compliance, and product safety—falls under his supervision. On top of that, Lerner works hands-on with the human resources teams in the United States and Europe, often regarding monitoring the employee termination protocol he initiated a few years ago. In the past, a manager could simply fire someone, and legal and HR would need to scramble to catch up. “Now, there is a tight protocol for documenting and elevating the decision, and approval from legal is required for any employee termination,” he says. “By having all terminations run through legal, we can make sure that we have proper documentation in place, that people have received adequate warnings, that they are not in a protected antidiscrimination class requiring special attention, and that good process has been followed.”

“Legal touches everything. Sometimes, we are the only people in position to see all the pieces of the puzzle.”

This change in business processes, driven by legal, has drastically reduced wrongful termination claims of all kinds. “I won’t veto a termination that is otherwise appropriate,” Lerner says. “My job is just to make sure there is no unnecessary risk and that we’ve done our homework.”

The risk management team has also implemented several new safety training and awareness initiatives. These initiatives have not only helped to boost morale and decrease injuries on the operations side, but they have also saved the company money through reduced frequency of incidents, lower medical costs, and fewer absences due to injury. Much of this success stems from emphasizing safety in everyday operations, tracking incidents to identify trends and take early corrective action, and creating an enhanced safety culture that starts with employee engagement.

“With operations in several major facilities here and in Europe, we make our local safety committees more active and aggressive,” he says. “We’re implementing enhanced reporting processes so any safety situations are quickly elevated for remediation. We use early trend analysis, so if we see similar fact patterns or injuries, we can focus on a root cause that needs addressing.”

When a new product is onboarding, risk management gets involved with the product group to see if special labeling, shipping, or storage requirements are needed, he explains. “We’ve also worked with the product management, customer service, and IT teams in the United States and Europe to implement automated reporting of product safety incidents, so we can get our engineers, legal, and safety review functions in gear immediately upon the report of an incident,” Lerner adds.

These initiatives have been a stunning success in enhancing the safety environment and reducing costs. “The first and most important thing is keeping people safe, of course,” Lerner says. “You have to sell an awful lot of product to cover the financial cost to a business of workplace injuries. All these things we have done, plus empowering employees to police themselves, may sound trite, but making safety part of the culture and getting people to think about it in their everyday interactions makes a difference.”

His legal team helps the business side launch new product initiatives, as well. In the United States, for example, Systemax is growing its lighting business. “We already sell lighting equipment, and we want to expand to installation and project management,” he says. “Legal is with them, shoulder-to-shoulder, to properly structure that in terms of liability, customer relations, and other concerns.”

In the United Kingdom, Systemax has launched a new networking services and solutions business to complement its historical hardware and software businesses. “Our purchase and sales documentation as a product-oriented business didn’t line up with a service business,” Lerner explains. “Legal worked with the leaders of the new business to set up a separate approval process and different contractual arrangements to more speedily move their transactions through to closure. It was a great example of the business and legal working together from inception to craft a new business model.”

From new product launches, new business units, and enhancing process management to operations and product safety, Lerner’s role at the company crosses almost all departments. “Legal touches everything,” he says. “Sometimes, we are the only people in position to see all the pieces of the puzzle and how to make them best fit.”