Ronald J. Frappier
Jenkens & Gilchrist, A Professional Corporation
Corporate Practice Group Leader

The Role of the Corporate Lawyer

The corporate lawyer must become part of the fabric of the transaction and facilitate its orderly conclusion. Although that may appear fairly simple, it is one of the factors that distinguishes the simply good from the great corporate lawyer. Great corporate lawyers have the ability to create and become part of the momentum of a transaction and to align the parties into agreement to finalize the transaction. It is the responsibility of the corporate lawyer to work among the legal, practical, emotional, rational and irrational issues and differences that exist among the parties in order to draw the transaction to an efficient conclusion.

Business sense is, obviously, a valuable attribute in a corporate lawyer. If the attorney attacks a transaction as a technician only, then that approach does not provide the appropriate additional value to the client. It does not, in fact, expedite the closing. That attorney is simply scribing the deal. The extent to which an attorney handles a transaction with business sense and business savvy, provides a sense of the direction in which the transaction is going. Some business lawyers are content to do what they are asked to do. Р’В«Document this transaction. This is what we want. Negotiate it with the other side and try to get what we want.Р’В» That may be minimally appropriate, or even common, but it is certainly less enticing than being part of the process as a business mind and involved in the analysis that says, В«Does this make sense in context?В» or В«Here is what will inspire themР’В» or Р’В«I can see this as a problem.В» This approach involves looking at the transactions big picture and utilizing business savvy to help bring the pieces together.

Interacting with Clients

A meaningful degree of due diligence is performed in taking on a new client, depending on who the client is and what its objectives are. If it is a large, significant, public company, one can look at its public filings and get a description of the company and an understanding of its strategy and direction. If it is a start-up company during the Internet boom quite a few technology-driven companies were formed the diligence involves getting a sense of its business plan, vision and strategy, where it is going, how it will accomplish its goals, and analyzing whether we believe from our experience that this makes sense or is workable.

One must filter through that. The diligence is not necessarily designed to conclude that the prospective client has money in the bank and that it can pay its legal bills. It is really designed to determine if it is a viable entity and if the business plan has meaning and potential. Would we like to be plugged into this? Can we help them?

Clients want to know how they are being charged, what value-added benefits we bring to the table, and what expectations they should have of the lawyer and firm as their corporate practitioner. To the extent that they just want someone to document things, are they really in the right place? Interestingly enough, a large part of what many companies seek is what we could call chemistry. Do I, as a potential client, respect this person as a corporate lawyer?

Would I be willing to listen to her advice, follow her guidance, and believe what she tells me? Clients are looking for that.
The essential goal is to understand keenly and precisely what the clients objectives are in terms of its business. Sometimes that is easily discernable. As a firm, we understand its business. We understand its objectives. We understand how we fit into the process. The client has investment bankers, accountants, employees, officers, directors and lawyers. Where we all fit into the equation is significant. We want to understand our role. Our goal is understanding where they are going, what our place is, and how we are part of that.

Part of the satisfaction of practicing corporate law comes not from producing documents or closing transactions, but from helping our clients achieve their goals and realizing that a large percentage of that achievement relates to our function as their lawyer. That is gratifying.

There are a number of ways to get an understanding of a clients business. First, we sit down and talk to them. We ask what they do and how they do it. One of the wonderful, challenging aspects of practicing corporate law is that clients are different, businesses are different, strategies are different. In years of practice, corporate lawyers encounter a vast array of different businesses, methodologies, business plans and facts. We love to hear the facts. We love to hear how clients operate their business and how it is accomplished. Then we ask if they have any business plan data, information that they have prepared, brochures anything. We read everything we can on that company that they have provided. We will find collateral information on similar businesses. The Internet is another obvious source.

We may also examine trade publications and journals to learn and understand their business. That step is often ignored by some corporate lawyers. One cannot go solely by what the client tells the attorney because that information needs to be in the context of the clients industry. An attorney cannot expect to understand the entirety of the business unless he is also utilizing collateral sources. On a continuing representation basis, as corporate practitioners participate in board meetings, talk to auditors, and interface with investment bankers and others involved with the company, they learn more and more.

The ability to observe and retain that information becomes very important, because the greater the practitioners abilities in those areas, the more he will be able to serve the client as a corporate attorney. He remembers and understands its business and constantly expands his knowledge of its business and the industry.
Informing the client of legal changes may be accomplished in a fairly traditional manner. The corporate attorney should send the client a notification by mail, telecopy or email when there is a development. In addition, it should be an integral part of the corporate attorneys practice to periodically send clients articles from journals, newspapers or the Internet that relate to the clients industry, business or particular needs.

In addition, we produce email alerts on items that are of significance to our clients. Sometimes it is important that we pick up the phone and say, В«Here is what is happening. If you want to know more about it, then I will visit you and discuss this fully.В» If you are not doing that, then someone else may be doing it. We are in an exceedingly competitive legal environment, and staying in tune with the industry and providing that information creates a comfort level for clients because they know their lawyer is interested in their issues and is looking out for them.

Assessing and Communicating Risk
It is critical for the corporate practitioner to find some manner to understand and communicate to his client what the implications and risks of various actions are. A large but real variable among lawyers is how they quantify these risks and how they factor risk into their analysis in advising their clients. On one end of the spectrum are attorneys who do not care about the risk. Either it does not matter to them, or they dont recognize it, or perhaps they dont believe it exists. On the other end of the spectrum are attorneys who see everything as a risk. As a result, they have difficulty with any magnitude of risk. They cannot scale it, they cannot weigh it, and they cannot synthesize it into anything meaningful in order to make decisions.

In meaningful risk assessment, the corporate attorney must have the cognitive ability to grasp risk, synthesize it into the equation, and then move forward based upon a keen understanding of how to weigh that risk of action versus inaction. Unquestionably, one must take risks in business. Therefore, the corporate practitioner has to take risks in the practice of law to get things accomplished. Often the easiest thing to do is nothing. That may be perceived as risk-less, but it produces no momentum and no gain.

When we are informing our clients of risks, we say, В«Here is what could happen if you take this action, and here is what could happen if you take this other action, and here is what we recommend.В» We try to handicap for clients in some quantifiable manner how significant we believe the risk is, how probable it is, and how likely it is to occur. We find that clients appreciate that information. Interestingly, it is not something that clients typically get from other lawyers. That process is part of understanding the intersection of law and business.

For example, clients may go to a smart lawyer with a particular problem and a certain objective and ask, В«What do I do?В» The smart lawyer looks at it and may come back with a 10- or 20-page memorandum that outlines the issue and the legal analysis that applies to it. He states that there is some case law that suggests this and some case law that suggests that; consequently, on the one hand it could be this, and on the other hand it could be that. It is all laid out for the client in a wonderful dissertation without a definitive conclusion. That is not an unusual product to receive from smart lawyers. But what does the client really want?

Clients want conclusions. They need to make decisions. Clients recognize that they need to make decisions based upon whatever knowledge they have, even if it is imperfect. Lawyers, on the other hand, are often too conservative and too timid. They are not willing to provide the data to make decisions in a manner that the client can manage. The client says, В«OK, I understand what you have told me. But what should I do? There is a lot of information here about on the one hand and on the other hand, but I have no direction.В»

The intersection of law and business means understanding, as a corporate practitioner, the business reality of the transaction. Understanding that something must get done; that some decision must be made. There are lots of inputs and lots of data to be synthesized and weighed to reach a definitive conclusion. So for the ideal corporate practitioner to whom the client is coming for help, there must be a more practiced approach. He must pour the factual issues into his mental filter. He must pour his knowledge of the clients business into his filter. He must pour his understanding and awareness of their own risk tolerance into his filter. Where do they fit on the spectrum of conservative to liberal?

Then all of this must be run through his legal filter, which says, Р’В«This is what the law allows, here is what the law provides, here is the way these things get done, and here are the risks involved.Р’В» In a mentally computed analytical moment, the ideal practitioner needs to be able to take all of this, run it through, and come out with a conclusion that says to the client, В«You must do something. I would suggest that you do this. If you do this, here are the risks involved. Here is how I would weigh them. Here are the benefits involved. Here is how I would weigh them. Here is how I would structure the transaction to accomplish your objectives with minimal riskВ» He can either come back quickly with that answer, or he can sit with the client and ruminate over it and work through the analysis to come to a business conclusion.

Coming to business conclusions using legal analysis and business acumen on the lawyers side is what we call the intersection of law and business. That is something we recognize does not exist in many law firms. Indeed, it is not something that is encouraged in many law firms because of the potential liability they fear they will incur for helping clients make business decisions and not just legal decisions. That, however, is one of the things that truly separates good from great corporate practitioners.

Values and Ethics

One of the things very important to us – and something our clients understand very well – is that we can never advise them and we never will advise them in a manner that distorts reality, shades the truth, or violates principles of ethics or legality. We all must operate in the world and in the business environment according to a certain set of standards. Our view is inspired from our personal beliefs that things have a tendency to work themselves out correctly if handled correctly. That is almost something that you could define as «deal optimism.» It is an optimism that our objectives will be met we will achieve this if it is to be achieved properly. If we cannot achieve it properly, we will give it up. There is probably great gain to be made through illegal practices or improper ethics, but that is not appropriate and it is not lasting.

Because of that overlay, our clients, when they come to us, may already know the answer. We will say, В«You cannot do this because it is improper, and I will not advise you to do this because it is improper. I will recommend that you do not do this because it is improper. If you persist, here is the risk to you. This is the downside.В» In quantifying the downside, we attempt to go beyond the moment and into the future, where, if this comes to light later if you have any litigation connected with some of your disclosures, for example they may determine that this other thing was improper. That creates a color or a pattern or a problem that could have significantly negative implications to the client. We believe that our clients respect that.

When an accounting firm calls up and says, В«We are a national accounting firm, and we are getting ready to pick up the auditing work for your client. We would like to talk to you about your client.В» obviously they are asking similar questions about ethics and responsibility. Those things are even more critical today in the post-Enron era. High praise to us would be if we can tell the accounting firm that the client takes advice well. That they respect advice. That they appreciate the constraints of ethics and legality and respond to advice within that framework.

We also understand that giving up an otherwise great client with questionable ethics is acceptable. We cannot build a practice on the wrong clients. That is not to say that sometimes mistakes are not made within the clients organization – especially if it is not cultural; it is accidental, or there is a renegade in there. Obviously we would help them manage those issues.

Not only do corporations need to operate within the normal boundaries of responsible ethics, but it is increasingly important that they appear to be doing so. That is one of the big differences. We believe that there have been inappropriate behaviors by corporations and individuals over time and throughout time. That is just the nature of humanity. However, we believe that with todays heightened scrutiny and analysis of corporate fiduciary behavior, there has been a response on the corporate side emphasizing that officers and directors appear aboveboard, righteous and as though they are behaving responsibly. That attitude drives even better behavior, because not only does the client want to do the right thing, it wants to look like it is doing the right thing. If the client is ever accused of doing the wrong thing, the practitioner wants to be able to present a fairly pristine image and factual foundation of appropriate behavior, good analysis and responsible activity. In short, in the past few months we have seen sort of a straightening up of the spine of corporate America. We have seen more of a willingness to respect the appearance of propriety.

Key Issues

We think the issue that has a number of companies figuratively scratching their heads is how we are going to behave in this reactive environment, which allows a level of criminal liability for chief executive officers and chief financial officers who lie or mislead the public. What level of liability is there for directors trying to behave in a manner they believe is responsible in discharging their fiduciary obligations to direct the company from the board level? The issue there is what can we do to keep ourselves from going to jail or being perceived as being worthy of jail, or how do we operate normally without this overlay from the public looking for liability and problems, and seeking retribution? To us, one of the larger issues is finding good corporate directors willing to serve in this environment of heightened scrutiny and heightened liability.

How does a company get back to its core business and perform and function without spending an inordinate amount of time complying with disclosures, presentations and things not really meaningful and that do not get to the core issues the public should be concerned about: financial performance and actual operations of the business? We see that – and we would suspect that others would agree – as a very large issue.

Other issues that we are seeing now, or that we have seen over the past few years, relate to the ability to raise capital in this economic environment – and in this context we are referring to the post-Internet-bust environment. Smart, clever business plans are not getting funded because it is more difficult to get business plans funded. Fortunately, the entrepreneurial spirit will never die. It still exists in America. But it is being squelched somewhat by the fact that it is harder to get noticed, recognized and funded.

We are seeing pressure on existing companies that already have workable business plans operationally but cannot get to the next stage, because the public markets have been essentially shut down. The public offering markets, where we have spent a great deal of our time in the past, have been quiet, and it is difficult to bring initial public offerings or secondary public offerings when the stock market is trying to find its level and the public is running away from corporate America because of what they fear are exceedingly bad abuses of corporate responsibility, mismanagement, waste, greed and corruption. They are casting a negative light on good, solid companies that never had, and perhaps never will have, those problems.

The CEO, as a status, is probably at a low point. We see that as an issue. The issues that confront rank and file corporate business relate to the ability to raise money and survive, to get the proper valuations they need to grow the business, versus the other issues relating to personal liability and corporate liability or actions or inactions. It is not a friendly environment for the development of future business and for the growth that we need in America.
As we try to analyze what will become the issues in the future, we think they will involve the difficulties newly formed entrepreneurial start-up corporations will have achieving public-company status. Historically, great ideas get funded, companies grow, develop and become public companies.

In the future, we see it becoming more difficult, more challenging, and less desirable, to cross that threshold from private company to public company status. We hope that at some point we will find stability and a pattern of mutual behavior where the regulatory side and the regulated side are connected in a way that operates for the benefit of the investing public. Investors need to become comfortable again with the systems, controls and laws are in place so that mom and pop can go to bed at night realizing their investment in this company is safe from corruption and scandal and that results will get an appropriate accounting treatment.

We would like to see more attorneys come to understand the connection between law and business. We would like people to understand that the practice of corporate law is not like the provision of utility services. It is not electricity that can be switched on and off. It is really an intelligent art that involves a keen balance of brain power, motivation, drive, and understanding – legal understanding, business understanding, and human understanding. We would like to see a keener understanding – on the part of clients and the public – of this fairly expansive role of the corporate lawyer so that we can be utilized to the full extent of our abilities. Often, great corporate lawyers end up becoming frustrated, leaving the practice of law and going into business. We are not saying that that is necessarily a sad thing, but when the profession is losing great attorneys, this bleeding off of the profession into business is an admission that the highest and best use of that particular person was perhaps not in the law. If clients could learn to extract or demand (or at least accept) from their corporate lawyers that kind of behavior, business advice and input, then those corporate lawyers could be fulfilled in the practice of law.

Necessary Personal Attributes

One thing we find surprisingly important as corporate lawyers is the ability to be able to relate on a personal level to the persons involved in the transaction. This person could be the lawyers client, the lawyer on the other side of the transaction, the investment bankers involved in helping your client raise money or the accountants involved in helping to understand and describe the accounting end or the financial performance of this company appropriately. What is exceedingly important is the ability to connect with this other person. Attorneys have to understand what they are trying to achieve, and they have to help others understand what they need to do.

Too many lawyers are able to perform what is asked of them, but they are not able to reach beyond that and understand the full implications of what clients really require in the context of the transaction or in the context of the broad issues of the business plan and objectives of the company. That may be hard to explain, but it is also a very difficult characteristic to find in the corporate practitioner. As we recruit young lawyers to come into this group and become corporate practitioners, it is very important for us to perceive in them an ability not just to take a technical approach, but to understand the humanity of our practice. That is very difficult to teach, but some people have it innately, and some people can develop it and understand it.

There are several key attributes that we believe are important. There needs to exist the ability on the part of corporate practitioners to understand completely their importance in the structure of the law firm. It is not about this particular document or this merger agreement that she is drafting or reviewing or that she is commenting on; it is understanding where it all fits into the big picture. Catching this vision is very important, and some people are not able to lift their eyes from the narrow focus of their technical obligations and the details of life.

The second important thing is being someone who is willing to accomplish his task and to go the extra mile to get it done. Ultimately, client service is what it is all about. Your client wants a particular thing. The corporate lawyer provides it to the extent he can, but in a broader context. Give them what they should want, what they really want, what they may not be asking for properly, but what provides everything that they need to fulfill their objectives. The ideal practitioner is someone who says, В«Ill do that. Ill get it done.В» We try to instill and inspire going beyond the normal production. This person is someone who goes beyond expectations, who understands fully and deeply, and who has that positive attitude of performance and belief. Obviously, no one wants to utilize a service person who has a bad attitude, is pessimistic, does not believe that it can be done or who initially wants to discourage the client from achieving its goals. Why would they do that?

By nature, some people are that way. Also, by virtue of the grind of life and the burdens inherent in the practice of law, they become that way. We try to make sure that they do not become that way.
The third attribute is becoming part of the functioning group that is providing the legal services. That means understanding – as a corporate lawyer, for example – what it means to be part of the group and who we are collectively. It is not just the practitioner in her office, with me in that office. We are all here providing a coordinated service to our clients. Some large clients require a lot of cooperation. Everyone must understand where he or she fits into the larger picture.

Associates are not tools of production as much as they are part of the fabric of the delivery of corporate legal services and advice. This is where they fit in. This is why it is important. This is why you do a great job on everything. It is the shareholders and partners job to understand the big picture, to be part of the fabric and provide this great seamless delivery to the client. However, we do not see that happening in many other firms. Typical firms are too often simply production shops: go to work, crank it out, give it back. That sort of mechanical, heartless, inhuman approach does not lend itself to the great relationships that otherwise develop in the context of service delivery.

Succeeding as a Corporate Lawyer
The best advice I ever received – and maybe to me it is the best because I received it very early in my career – became an element of the foundational framework for understanding my practice, corporate law, life, clients and everything. When I think back on that advice, it seems basic and simple, but so key and important to me. A senior attorney said something to me that altered my focus and understanding. The attorney said in very simple language, «Put yourself in the mind of the client. That is what you need to do.» I took that and extrapolated that into my views of the intersection of law and business and fit it all together. What that really meant to me was: What are they thinking? What are they really feeling? What do they want? What do they expect? Why are they coming to me? What do they need? What would they like to hear me say? How can I help them? When clients say that they have a question for me, I put myself in their minds.

I ask myself those questions and ask myself what answer they would like to hear. What answer would I give them? Consequently, in context, I know when I answer their question that I can say, В«You would probably like this. You would probably love to hear this. Here is what I am going to tell you instead, and here is how it all fits for you.В» That approach gets down to the human element of the practice of law versus the more mechanical or cerebral approach where the client says, В«Here is my question and here is what I would like to do,В» and the lawyer comes back and says, В«No, we cant do it. Heres why. Sorry.В» What do clients gain from that? Nothing. They just know that they cannot do what they want to do. If the corporate practitioner would put herself in the minds of her clients and understand what they want to do, what their objectives are and how it is possible for it to work out, then she could provide the answer, because she is the lawyer. She may know that the client cannot accomplish it that way, but perhaps the client could achieve its objectives this other way.

It is the corporate attorneys function to sit with the client and help it achieve its goals based upon the facts and circumstances and the overriding legalities that the client may not be aware of. That give and take, that mutual cross-flow, can only exist in the mind of the client. This is in contradiction to the typical corporate lawyer who says, В«Hey, I answered his question. I was 100 percent accurate. What is the problem? Why is this client not coming back to me for more advice? Why is it now using someone else as its lawyer?В»

Success in the practice of corporate law can sometimes be measured by the number of clients one has and the gross dollars of revenue one collects, but the real measure of success is when the corporate practitioner has connected with her clients on a level that has enabled the client to come to respect, acknowledge, and rely on her advice and input. The client will not make a major decision without coming to her and seeking her advice, wisdom and counsel. The measure of success is the penetration she achieves into the company, the people, and their hearts as a corporate practitioner and as a human. She can go home at night saying, В«Wow, I really helped them today, and I really understood their problems. I provided value. I addressed the problem, and the client understood where I was coming from.В» Over time, clients will say to other people, В«She is the best corporate lawyer I have ever met. She is the finest practitioner I have ever known.В» And it is not necessarily because she handled the biggest merger in the city that year, but because of all these other important attributes. That is the definition of success.

Ronald J. Frappiers practice focuses on corporate and securities law. His experience includes the representation of public and private corporations, partnerships and other entities and individuals generally and in connection with the planning, structuring, negotiating and closing of mergers, acquisitions, and capital-raising transactions (from venture and seed capital financings to public offerings of debt and equity securities), as well as general corporate, business, and securities counseling, compliance, and related matters. He has also provided underwriter representation in multiple public offerings and has handled various initial public offerings of equity securities. A graduate of George Mason University (B.S., with distinction, 1979), Frappier was awarded his J.D by the University of Virginia School of Law in 1984. He is a member of the American Bar Association, the Texas State Bar Association, the Dallas Bar Association and the Dallas Business Association.