A conversation with Lucy Fato, General Counsel at McGraw Hill Financial

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Last week Bloomberg’s new Big Law Business website published a two-part extract [It’s All About Relationships and ‘Gut Checks’ Are Better than AFAs] from a recent interview Bloomberg had with Lucy Fato, General Counsel of McGraw Hill Financial (among others, parent company of Standard & Poor’s).

Transcripts from the interview make for interesting reading. While not agreeing with all Ms Fato has to say, her take on the following issues run close to how a number of in-house counsel feel here in Australia:

On the role of in-house counsel:

But my view is that the role of in house counsel is, in many ways, to be the face of the company in these situations. Outside counsel can never really have perfect information about what a board or a CEO is thinking. They can never really step into the shoes of in-house counsel.

That’s how in-house lawyers really add value. They can connect all the dots. I think, historically, general counsel deferred more to outside counsel than what you see today. It’s a process that has evolved.

On the role secondments can play in developing personal relationships with in-house counsel:

Secondments are a great way for a firm to build a relationships. The associate is actually here, in our building, getting to know our people, getting to learn our business, and when they go back to the firm, they bring all of that knowledge with them. It’s especially effective when a firm is new to the company.

On the developments going on in in-house departments:

In-house departments have become much smarter about how we manage our departments and how we manage our legal expenses. In-house departments are becoming bigger, more global, and many companies, including ours, spend a lot of money on outside counsel. Getting a handle on that is extremely important.”

On the role data plays on the modern relationship between in-house and external legal:

I’m very big on data and having a lot of information to work with…

E-billing gives you enormous visibility into how law firms make money.

On alternative fee arrangements:

Getting better control over who we’re spending money with, how they are staffing deals, how much time is being spent on matters — taking a hard look at those types of questions is more effective over the longer term than trying to do alternative fee arrangements.

On hourly rates:

But I will say it’s gotten a little out of control. It’s eye popping even for me, and I’ve been doing this a long time, when I see an hourly rate that’s over $1,000 an hour. I look at that and think, “Really?”

Ms Fato makes a number of other good observations and comments, both about the evolving role of in-house counsel and the relationship between in-house departments and their external legal advisers, but I wanted to finish this post with probably my favourite:

Firms have to be mindful that their client is not just the lawyer. It’s also the business person.

Absolutely.

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