Ford’s GC David Leitch on Leadership During Crisis

Episode Notes

Transcript

Advertiser: Welcome to In-House Legal, where we cover a variety of the issues pertinent to the general counsel and in-house legal departments of small, midsized, and large organizations. Join host Randy Milch each month as he discusses the latest developments, trends and best practices for this very busy and often complicated area of law. You’re listening to Legal Talk Network.

 

Randy Milch: Hello, my name is Randy Milch and I’m the host of In-House Legal on the Legal Talk Network. I‘m honored and happy to have as a guest today, David Leitch, the group vice president and general counsel of Ford Motor Corporation. In addition to having held for nearly a decade one of the great in-house jobs in the world, David was a Supreme Court clerk, a partner in a major national law firm, and has offered up distinguished government service. David, welcome to In-House Legal.

 

David Leitch: Thank you, Randy. Good to be here.

 

Randy Milch: So, David, I wanted to take a few minutes and go over for our listeners your background. You’ve had a very, very interesting route to the general counselship, one that has interestingly has passed through both the major law firm and government service a number of times. But you started off at UVA and then you clerked on the Fourth Circuit. Tell me about your decision to clerk and whether you think that’s a decision that even today has served you well.

 

David Leitch: It was one of the best decisions I ever made. Of course, the decision wasn’t solely mine, I had to find a judge who would take me. But I was fortunate enough to find an outstanding Fourth Circuit Judge, J. Harvie Wilkinson, who was on the faculty at UVA when I was in law school there. I had actually decided not to clerk and then when he was confirmed right at the beginning of my third year, he was looking for clerks and many of my classmates had already landed clerkships. He reached out to me and asked me if I’d be interested and it was one of the best things that ever happened to me.

 

Randy Milch: And then you went on to clerk for the chief justice after Judge Wilkinson, right?

 

David Leitch: Yes, that’s correct, he actually wasn’t the chief justice when he selected me or when I began but he became the chief justice a few months after I began clerking for him.

 

Randy Milch: What was your decision after that to go? You went off to the justice department through the office of legal counsel which could be seen as your first stint in a general counsel’s office. Describe for us what the OLC does and how you found your time in that part of the government service.

 

David Leitch: Actually, about two and a half years at Hogan & Hartson in Washington before I went back into government service in the justice department. So clerked, went to Hogan for a couple of years and then went to OLC. The office of legal counsel and the justice department has an outstanding reputation and has enjoyed it for a long time. People who have headed the office have included folks who have gone on to the Supreme Court, William Rehnquist and Antonin Scalia. Folks have gone to be attorney general, and a lot of other distinguished people. It really is the general counsel’s office for the justice department, but also, more generally for the executive branch of government and provides really high level advice on constitutional issues and statutory issues for the executive branch. Resolves disputes or disagreements between executive branch agencies, provides a lot of counsel for the White House counsel’s office and works on some really fascinating issues. It was a great place to spend a few years.

 

Randy Milch: It sounds like you get a bird’s eye view on all sorts of executive branch problems and issues. Do you count that as a beginning for your understanding of public policy and other types of issues that general counsels face in corporations when they try to deal with the government?

 

David Leitch: It was the beginning of that but the office of legal counsel operates in a little bit of a rare fine air because the office doesn’t really give policy advice or consider public relations. It’s a little bit of an ivory tower and the office tends to write opinions for others in the government saying what the legal options are but then doesn’t itself get involved in what is done with those legal options. Obviously, not everything that’s legal is something that’s good policy or will go over well with the public. It’s a little bit more isolated than the typical general counsel’s office either inside or outside of government where you have to consider all implications of your legal advice. But it certainly laid the foundation to distinguish what is legal advice and what is the rest of the legal advice that people in positions like ours have to give. And so it was great training for what I went on to do in retrospect, I didn’t realize it at the time, but it was a really good foundation.

 

Randy Milch: So after OLC, you went back to Hogan. What was your practice at Hogan like? What were you concentrating in?

 

David Leitch: I worked in appellate litigation. One of the things that I discovered through clerking and my early practice and in particularly OLC was that I really like to write and I like to think about more purely legal issues more than I like the factual development of cases taking depositions and things like that. So I had an opportunity to go back to Hogan and work in an appellate practice with the person who had been at Hogan with me and became the principal deputy solicitor general when I was at OLC, John Roberts, and now of course the chief justice. So we went back to Hogan roughly at the same time around the Bush 41 administration and worked closely together with a number of others at building an appellate practice at Hogan.

 

Randy Milch: So you did that at the end of Bush 41, so I guess you built your practice during the Clinton years. But then in 2000, you made the determination to go back into the government. So how did you think about that after running a successful appellate practice? What drew you back into the government and Bush 43?

 

David Leitch: I think one of the really great things about practicing law in Washington is that there are opportunities to go in and out of government throughout your career, and it was one of the things that I really enjoyed, the opportunity to have a varied and richer experience by moving in and out of government. And I think it made me a better lawyer by having those different experiences. I also love public service and I think you get a lot more responsibility often in a government than you can get in private practice. And I also thought that while I really enjoyed the appellate practice and it was a great part of my career, I also thought that some day I might want to get into more of a general counsel type job and those things are easier to get in the government than they are in the private sector. So it was a great experience for me to think about managing an office and learning how to be a manager and the FAA was a couple of hundred lawyers spare around the country.

 

Randy Milch: So when did you take the reigns of the general counsel job at the FAA, the chief counsel job there?

 

David Leitch: June 2001.

 

Randy Milch: So you had a short run up as so many folks in the administration did at that time to a massive crisis in 9/11 and in one that particularly affected your executive branch office, the FAA. What was the crisis atmosphere? Did you have substantive knowledge of the FAA law before you went in there? Was that something you had practiced or had the opportunity to write a bridge about in private practice?

 

David Leitch: No, I wouldn’t claim any particular expertise in the FAA’s area of regulatory practice. I certainly knew administrative procedure, the kinds of things that would be the fundamentals of practicing in a government agency. And the beauty of the kinds of jobs that I’ve had both there and since then and that you would have had at Verizon and elsewhere is you have a lot of experts working with you. So you can’t necessarily be an expert in all the areas of law that might come across your desk and you have to learn how to trust and rely on people who have had a lifetime of expertise in that area. So I didn’t have any particular background in aviation law or matters that would have been the routine work on the FAA prior to 9/11. Of course, nothing that happened on 9/11 and on the days and weeks that followed it really involved that kind of core FAA regulatory administrative law docket. Everything was different in the days that followed 9/11 because it was a situation that frankly was unanticipated.

 

Randy Milch: So describe, if you could, the kinds of issues that you were facing at that point and how you had to maneuver. What were the kinds of advice categories that you were giving the administrator in the issues you were facing. What were the legal issues you were facing?

 

David Leitch: There were a number of things in the immediate aftermath that first involved getting the airspace reopened because as you recalled on 9/11, the FAA brought down every plane that was in the air and with unbelievable compliance by the pilots and crews basically without having a lot of explanation were told to land and they did. But then you had how we were going to reopen the airspace and what were the security issues we’d have to implement. Not a lot of legal issues involved there, it was just more policy. But then, quickly, we pivoted to two main legal issues. One was how could we quickly supplement and increase the number of air marshals that were flying on planes in the US. And I was asked by the secretary of transportation to work on that process and essentially that involved identifying federal law enforcement officials from around the government who could receive some quick training on the particular security environment of an airplane and by assigned to fly as temporary air marshals while that force was stood up more permanently in the months after 9/11. The second major thing was the transformation of the security at airports from private contractors hired by the airlines to what we now know as the TSA. And that involved legislation, that involved a big effort to manage the contractual relationships through private contractors to government agency. There was also one other really compelling issue in the days immediately after 9/11 which was the government need to provide terrorism risk insurance for the airlines because they all had their policies cancelled sort of immediately after 9/11. And they all were unwilling to fly unless they got some insurance and the government stepped in quickly and set up an insurance program that we were involved in setting up.

 

Randy Milch: Did that require special legislation to get the insurance program up or was that pre existing authority that was simply utilized?

 

David Leitch: No, I think we needed special legislation and it passed very quickly, because the environment was obviously much different than whatever normal is in Washington.

 

Randy Milch: Yeah. There was quite a bit of unanimity for at least a little while right after 9/11, it was quite a different atmosphere. So I guess one of the things I’m interested in is at a general counsel’s office, that’s particularly one like Ford’s where you have a global organization with a lot of people, I think one of the things you can be sure of is that as good as your people are, somewhere in the world, something’s going wrong. Someone is making a misjudgement or a mistake. So there’s always in the general counsel’s office a bit of crisis management going on. How do you compare the way the government handled a crisis? I don’t mean to over compare something as horrific as 9/11 with a simple corporate crisis in comparison, but do you note any differences in the way government approaches crisis management than what you have seen in the private sector?

 

David Leitch: I think it depends on the kind of crisis you would have in the private sector. Some crises in the private sector are very much like the kinds of crises you would face in the public sector in that they involve the white hot spotlight of publicity and negative attention. And just to think of examples from my industry, the GM ignition switch matter, the recent Volkswagen admissions matter, it was particularly GM, felt very much to me like the kind of thing you would face in the government in the sense of you are principal clienting call up to the hill, a lot of press attention, skits on Saturday Night Live, just the whole panoply of things that you would have in the government when you’re involved in a regulatory issue that gets the attention of the hill and of the press. I think it can be very much like a government crisis or scandal. Then there are economic challenges within companies that can feel very different because you’re dealing, for the most part, with the markets and the analysts and disclosures and financial results that have a lot of very specific rules and measurements associated with them. I think in a government crisis, you don’t tend to have as many of those kinds of metrics involved.

 

Randy Milch: And do you find that the principles and the theories that we’ve all put together about how to lead in a crisis, how to keep people calm, how to keep people focused on the issues, how to be present so that people understand that everyone’s together. Does that turn out to be very much the same both in the public and private sector? The actual leadership and grappling with the endless hours and the hard issues and the personal decisions that may have been made seems pretty much the same?

 

David Leitch: I think they should be treated similarly. I think the human nature doesn’t change because you’re sitting in a corporate suite or sitting in an executive branch agency. The kinds of things that work well in those environments I think translate between the two. I think you may tend to see different dysfunctions in corporate and in public life, but when they’re functioning well, I think they’re very similar.

 

Randy Milch: David, I want to go through some of the things that you’ve had to face at Ford and ones that sort of straddle the line. The first that comes to mind is the fiscal crisis that we experienced back in 2008, I guess. Ford was in the interesting position of seeing its competitors bailed out by the government. How did you guys view that? I know that it was probably jocked early, we called GM Government Motors. But I would assume that from the interior, there’s actually a mixed set of views about whether bankruptcy would have been better, bailout would have been better. From a competitive angle, how did you see that?

 

David Leitch: Well, of course they were first bailed out and then they did go through bankruptcy, both GM and Chrysler. It was an interesting time because obviously there are a lot of mixed feelings about your competitor. Going through an ordinary bankruptcy would have been one thing, but then the public role and the amount of money that was dedicated, people had a lot of mixed emotions about it. Because on the one hand, we made no secret of the fact that we needed GM in particular and also Chrysler to not dissolve overnight in some undisciplined way because we share a lot of suppliers. There’s a lot of infrastructure in common in terms of the supply base and others in the industry. And had they gone out of business in some sort of undisciplined way, many of our suppliers would have gone out of business and that would have brought the whole industry down including Ford. So we needed a process that worked through all that. At the same time, I think people were concerned that we were going to be put in a position where we weren’t able to compete because as bankruptcy is supposed to do, they were getting a clean slate. Their debt was being affected, their labor contracts were being affected. All their litigation, dealerships, they had lots of freedom to do things as is the appropriate role for bankruptcy, that we didn’t have. People wondered are we going to be at a permanent competitive disadvantage because we didn’t have that cleansing process, that fresh start that they had. So there were a lot of questions along the way from members of the management team and I had to take a number of opportunities to explain to them, this is what bankruptcy’s all about and we don’t want to go there and we don’t need to go there. There are certainly disadvantages to it, and most importantly, we have a fair share of duty to our stockholders to protect them and we’re able to do that so we should continue to do that. We also got – in a way that we didn’t necessarily expect – a huge amount of public goodwill from not receiving a government bailout and that has continued to affect the consumer’s view of Ford Motor Company in the marketplace, which has been a big help.

 

Randy Milch: It was a very interesting time, I recall us discussing this when it was going on. I think I told you then that I went out and bought Ford’s stock because it was not getting a bailout.

 

David Leitch: You weren’t the only one. We had a lot of people say they were buying the stock or taking a new look at our products and they were proud of us and we tried not to toot our own horn about that because it’s not really the style of the company. But people did notice.

 

Randy Milch: Yeah. It was an interesting time. You mentioned VW in the last section. Obviously, it’s a delicate matter, but I guess I’m most interested in – this is one aspect of pervasive regulation for the auto industry is needing to meet pollution guidelines, milage guidelines. I’m interested in it from sort of the compliance perspective. How are you sure in any large organization that people are meeting the rules but they’re not cheating to do it?

 

David Leitch: That’s a question you wake up every day and ask yourself as you come in the office is how can you be sure? And I think you said earlier something that’s a lot like what I’ve said to myself and a lot of other audiences and that is there are roughly a couple hundred thousand of people that work for Ford Motor Company and then there are multiples of that doing business in the name of somehow related to Ford Motor Company around the world. I can’t ever be sure that one of them is not at this very moment doing something they shouldn’t be doing in the name of Ford Motor Company. But what you can do is try to have, first of all, a real ethical culture. The overused phrase, tone at the top, but it’s important and it matters. People take their cues from their leadership. So from the CEO to the heads of business units to each manager, I think has to have a real ethical behavior and message. You have to propagate that throughout the organization. You also obviously have to have great processes and controls in place to make sure that you are complying. When the test is run that it has the right certifications and the right checks that you have differentiation of duties and all the kinds of things you want from good internal controls. And then, of course, internal auditing and your external auditor to the extent they’re getting involved and just making sure that they can play their role and that you respond well when you find problems. You don’t shoot the messenger, you let people bring bad news forward. You let people make whistleblower complaints and have anonymous hotlines and all the things. You can set those things up but if people think they’re hollow, they won’t be effective. You just have to reinforce that you do want to do things the right way. And again, it’s not foolproof, but you have to just continually work on the message and the behaviors and the checks.

Randy Milch: Does internal audit report to you at Ford?

 

David Leitch: It does, yes.

 

Randy Milch: Is that a historical artifact or is that something you asked for and were given?

 

David Leitch: I was given it, I didn’t ask for it. But I think the thinking was that most of what internal audit does involves financial controls. They do a lot of other things but a big part of their diet is reviewing the financial controls and having them report to CFO. I wouldn’t say it was in response to any particular attention, but structurally, it looks better and may be better to have somebody who’s not CFO supervise that office. Of course, they really report to the audit committee but for administrative purposes on a day to day basis, they report to me. And everybody’s been very comfortable with the way that’s worked out.

 

Randy Milch: It’s an interesting change because you know we see that audit to compliance sometimes shifts back and forth between the general counsel’s office and the CFO’s office. It’s interesting that Ford offers an example of audit being under the general counsel’s office and it’s not a bad idea. Although at times, at Verizon, there would have been no way that I wanted another compliance organization reporting. You mentioned the GM switch and the VW. Does this cause you, despite your confidence in Ford’s culture to – when something like that happens do you go back and kick the tires right away? Do you go back to the office and say, “I want someone to go kick the tires on this one just because I know I’m going to get asked about it at the next board meeting”?

 

David Leitch: We might not say kick the tires because before I got here, Ford had a big issue with Firestone tires and Explorers, but I know the expression that you’re using. We’re absolutely, constantly examining external environment and seeing what’s going on with competitors and regulators and questioning are we doing the right things, do we have the right processes, can we know that we have compliance in this area. I think the real trick is can you look ahead and see what am I not thinking of. It’s easy once your competitors get in trouble for something where the regulator says, “Okay, now I’m going to start emphasizing this.” But what are the areas that we should be looking at that haven’t quite made it to the front yet and making sure that we’ve got great processes and controls in those areas as well.

 

Randy Milch: David, let me turn away from Ford in specific to some more general topics. If you were advising a young person today – and you probably get asked this all the time about whether they should go to law school or not – what do you tell them? Both about whether to go or not and if they go how they can best make a career of it.

 

David Leitch: I’ve been asked this question a lot throughout my careers, I’m sure you have, and one question I always have is where are you going to go to law school. I think unlike what I think may be true about the medical profession, where do you go to law school can make a huge difference. I don’t mean to sound like a law school snob, but if you’re going to the bottom tier of law schools, it’s just a really tough market out there, and you have to ask yourself are you going to law school because you like the education and it can be interesting and useful in a number of different environments. Or if you really want to be a practicing lawyer, I think you just have to have a very realistic view of the opportunities that you’re going to get from different places. That’s the marketplace that we’re in right now. I also think I didn’t know anything about the practice of law when I went to law school. I didn’t have any lawyers in the family and I got very fortunate to have put together a great career. But I think it is a career that can be very challenging. Obviously, it can be very demanding so you have to go in with your eyes wide open to that. But there’s still great opportunities for people who have the skill and the interest and the capacity to contribute and I think for the right person, it remains a great profession.

 

Randy Milch: So you spoke about your career a little bit in the past tense. It’s been announced that you are going to retire from the general counselship of Ford at the end of the year. So I want to talk just for a second about succession planning, because when you and I discussed this, you put together a slate and an internal candidate was chosen. Describe for us, if you can, how you went about making sure that there was an internal candidate and how you feel that’s going to go.

 

David Leitch: I’m very excited that the company has chosen an internal candidate and we have a really strong group of people here at the company. I think it’s one of the key roles of a senior executive of a company to try to give the company some really good candidates when the time comes for succession. We spend a lot of time as a management team talking about succession planning. We meet pretty regularly and go over plans and we talk about what the development needs are of the various individuals who would be in our succession plans. So this has been a very odd thing. I hadn’t been exposed to this before. Law firms don’t do this, the government certainly doesn’t do it, but early on in my tenure, I had to start thinking about who was going to be in a position to succeed me and what skills and experiences they might need to be put in that position. So it’s a long and careful process. Fortunately, we had a number of really good candidates and the management team has made an excellent choice and I think it’s going to be great.

 

Randy Milch: David, let me offer my congratulations on a stellar career and I want to thank you very much for spending some of your remaining days – a little bit of it – on the phone with me this afternoon. It’s been a great and hugely informative half hour, so thank you very much.

 

David Leitch: Thanks, it’s fun to talk to you about these things and I enjoyed it.

 

Randy Milch: And I would like to thank all of you who have listened to our podcast today. For all of you listeners who would like more information about what you’ve heard today, please visit www.LegalTalkNetwork.com. Or you can also follow us on iTunes, RSS, Twitter, and Facebook. That brings us to the end of our show. I’m Randy Milch, thank you for listening and please join us next time for another great episode of In-House Legal.

 

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