Do you know enough about the business?
Any general counsel needs to understand the unique challenges the company faces. Mistras, for example, is an inspection and asset-protection services company that tests critical equipment and capital assets used by companies in a range of industries, from petroleum to power generation. It has to ensure the quality of its work, the well-being of its workforce, and regulatory compliance in the states in which it operates. “Senior leadership should be asking the general counsel, ‘What do you need to know about the business, and what can we do to educate you?’” says Keefe. At the same time, general counsel need to proactively educate themselves.
What are you doing to prepare for our expansion into new markets?
Just prior to Keefe joining Mistras in 2009, the company went public. Since that time, the company has expanded from $209 million to more than $700 million in annual revenue. At the same time, its workforce grew from about 1,500 to almost 6,000. Today, it does business from more than one hundred offices in sixteen countries, and shows no signs of slowing. “To keep on top of that expansion, both geographically and into new business lines, I stay involved in high-level meetings and the development of the company’s strategy,” Keefe says.
What kind of leadership role are you taking in regard to risk assessment and management?
It is the general counsel’s responsibility to ensure that a framework is in place for the company to properly identify, monitor, and manage the key risks the business faces. That includes everything from an operational standpoint to legal compliance to intellectual property protection. For example, Mistras must meet standards set by the Occupational Safety and Health Administration. To ensure it does, the company has a safety and compliance group embedded within operations, which ensures employees have the right equipment and are trained to work safely.
What litigation risks do we face?
There’s always the potential for litigation in regard to service quality. “We inspect large capital assets, such as pipelines,” says Keefe. “So what happens if we don’t do the job properly?” But Keefe believes that is not the biggest risk for the company, as the major litigation risk Mistras faces is employee-related. Almost 80 percent of its US workforce is hourly, so labor, wage, and hour laws are major areas of concern. Varying laws from state to state add another level of complexity. “We have to stay on top of what each state is doing in regard to calculating overtime,” Keefe says. “For example, in California, overtime is considered any time worked over eight hours a day or forty hours a week. California does allow for an alternative workweek, such as ten hours a day, four days a week, without hitting overtime. However, employees must vote to implement this, and a new vote is needed any time there’s a certain amount of employee turnover. This is something that must be monitored closely by local management with the support of legal and human resources.”
What are you doing to monitor and reduce the risk of litigation?
It’s easy for senior management to see an explosion of cases and think the legal department isn’t being proactive enough, but litigation can result from the risks of the business or because businesspeople didn’t listen to the legal team’s advice, Keefe says. The general counsel needs to stress the importance of compliance with recommendations for effective implementation. The general counsel also needs to get management buy-in, which he or she can do by explaining to senior management how the legal department will be balancing the cost of being proactive and avoiding litigation with the cost of litigation itself.
What safeguards are we taking to prevent employees from trading on inside information?
Like many public companies, Mistras limits who has access to consolidated financial information at the end of each quarter. Management employees over certain levels, and all of those who are involved in accounting, finance, and communications, cannot trade from the twenty-first day of the third month of the quarter until two business days after earnings are released.
What are you doing to help set a good example?
Complying with laws and being a good corporate citizen starts at the top, and while it is the responsibility of the whole management team, the general counsel should have a major role, Keefe says. You have to make the difficult decisions and take bold action if needed, but little things can set the tone as well, he says. “When we get employees from competitors, I tell them clearly, even though it’s in our offer letters and employee manuals, that they must maintain the confidence of any confidential information they have from prior employers. I tell them straight out that we don’t want to know it,” Keefe says. “Honor your obligations to your prior employer just as we expect you to honor your obligations to Mistras.”
How are problems reported?
Keefe has set up a third-party hotline for employees to report concerns, which can be done anonymously if they so choose. “It was established for accounting and auditing concerns stemming from the Sarbanes-Oxley requirement, but we tell people it’s available for anything. Practically all of the issues we receive over the hotline are employee-related matters. All come to me, and I get the appropriate manager and possibly executive involved, along with human resources if necessary. We look at the issue, make sure it’s addressed properly, and determine whether there are any lessons to be learned.”
What are you doing to be as cost-effective as possible?
“You want to implement the necessary programs, but if you’re spending too much money, you’re not doing so effectively,” Keefe says. He discourages micromanagement by CEOs, unless a problem is evident. “A CEO should look at how the general counsel is doing overall,” he says. “For example, I always look at our overall spend internally and externally as a percentage of revenue and benchmark it against other companies of a similar size or in the same or similar industry, taking into account merger and acquisition activity. This is a good tool to assess how cost effectively legal services are being provided.”
What does it take to be a good general counsel?
There are several key attributes, Keefe says. Strong legal knowledge and intellect and good legal training are important, of course. But just as important is the general counsel’s ability to solve business problems, provide practical solutions that support the business objectives, develop strong relationships and credibility with the management team, and help ensure that the business objectives are met in a manner that is good for the business, yet ethical and legally compliant.