On the Inside Track

Seven Vanderbilt Law alumni who have served or are serving as their company's general counsel discuss the challenges of bearing the ultimate responsibility for how their company's legal matters are handled, advising senior executives and boards of directors, and dealing with matters as mundane as 401(k) loans, as serious as a government investigation, and as exhilarating as an initial public offering.

Chet Gerdts '78
General Counsel, PricewaterhouseCoopers

Chet Gerdts

Chet Gerdts had practiced as a corporate litigator for more than 25 years when he accepted an offer to join PriceWaterhouseCoopers (PwC) as its general counsel in 2002. His timing did not appear particularly auspicious. Another major accounting firm, Arthur Anderson, had recently folded, a casualty of the unfolding Enron scandal. "The future seemed very uncertain," Gerdts said. "Against that backdrop, I was asked by the then newly elected senior partner of PwC whether I would consider making a change."

The offer Gerdts received from PwC chair Dennis Nally was actually couched in the form of a challenge. "His basic pitch was that many lawyers could be a general counsel of a company in a quiet industry with no real issues," Gerdts recalled. "He suggested it would be a lot more fun to be a GC in a profession that was facing some fundamental challenges." When Gerdts left his partnership at Orrick Herrington & Sutcliffe to accept the offer, "Some of my law firm partners immediately questioned my judgment in terms of leaving a relatively safe place and moving to a situation that clearly had some risks," he said. "But I was at a point in my career where, if I was ever going to make a change, I needed to make it to have enough of a professional runway in the second career."

Gerdts joined PwC a few months after Congress passed the Sarbanes-Oxley Act (Sarbox). Designed to prevent the sort of fraud that had presaged the collapses of WorldCom and Enron, Sarbox created strict new financial reporting requirements for public companies and created a new agency, the Public Company Accounting Oversight Board (PCAOB), to regulate firms such as PwC that audit and report on the financial statements of public companies. "Before that, the profession was self-regulated," Gerdts said. His immediate mission was to guide the company through the transition from providing services in an unregulated environment to a regulated one.

The firm Gerdts joined had resulted from the 1998 merger of two industry giants—PriceWaterhouse and Coopers & Lybrand. Today, the PwC network has offices in 150 countries and more than 130,000 employees worldwide. Gerdts heads the legal department for the U.S. firm, working with 60 professionals in the Office of the General Counsel, and he depends on a network of outside law firms to help with matters ranging from litigation defense to regulatory inquiries.

After spending much of his career employing what he terms a "vertical approach" to legal work, Gerdts appreciates the "horizontal" nature of his work at PwC. "When you're an outside litigator, especially in trial preparation, your work involves learning everything you need to know about a very narrow subject, and you focus on the knowledge you need to get a successful result," he said. "It's a vertical approach, and you rarely make decisions—you make recommendations to the people who make decisions. The general counsel's approach to things is necessarily more horizontal. There are many more issues that require your input, if not your decision. The calculus is deciding when to make a decision—whether you have enough information, and whether that information is both credible and relevant enough to enable good decision making."

The general counsel also advises senior management, which Gerdts believes is one of the most rewarding, but also difficult aspects of the job. Gerdts recalls one instance when PwC was involved in a high-profile government investigation, and he and his staff made an uncomfortable discovery while gathering the materials the company had been asked to deliver to the government. "We found a document created by one of our people that put one of our most senior people in a bad light," Gerdts said. He called two of his most trusted outside lawyers to an off-site meeting to help him decide whether to include the document among the materials delivered to the government. The decision was far from clear-cut. "The document wasn't necessarily responsive to their request, and there was a good chance the government would never know if we didn't produce it because of its marginal relevance," he said. "But if we didn't turn it over, and it ever came to light and the government believed we should have produced it, we'd have faced a serious problem."

After conferring with counsel, Gerdts concluded PwC would produce the document. "It was a difficult decision, and one that necessitated a very tough conversation," he said. "But it was the right call. At the end of the day, that's what we're here to do—help the people who run the firm to make the right calls, especially in difficult situations."

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