Corporate lawyers at U.S. and international firms have been burning more midnight oil on regulatory issues in the past three years as the number of investigations — both internal and regulatory — has risen. According to a survey of company lawyers by law firm Fulbright & Jaworski, those at the largest U.S. companies spend the most time tackling investigative requests from regulators.
About 44 percent of the attorneys said they spent more time on regulatory matters in the past three years than they did before, while 44 percent reported spending the same amount of time. The industry hardest hit by regulation is health care, where three-quarters of corporate lawyers said they’ve dedicated more time to regulation. Also high on the list is the retail/wholesale industry, where two-thirds of attorneys reported spending more time on regulatory issues.
The findings are part of a 2006 Fulbright & Jaworski survey of 422 senior corporate counsel at 311 U.S. and 111 international companies, including 45 in the United Kingdom. About 53 percent of survey respondents represent companies with annual revenues of at least $1 billion, while 27 percent are from companies with revenues between $100 million and $999 million and 20 percent work at companies with revenues under $100 million.
Companies may need to get used to dealing with regulatory inquiries. Layne Kruse, a partner at Fulbright & Jaworski, expects that this year, companies will report an increase in time spent on regulation, particularly because of the recent focus on stock-option backdating practices.
Almost half of respondents reported an increase in the number of regulatory inquiries or investigations directed at their companies in the past three years. A majority (57 percent) of companies with at least $1 billion in annual revenues experienced an increase, while only 27 percent of companies with $100 million or less in revenues experienced more inquiries. The increase in the number of external regulatory inquiries or investigations was 49 percent in the United States, 38 percent in the United Kingdom, and 47 percent for international firms, including those in the United Kingdom.
Since most of the survey respondents represented U.S. companies, the agencies that conducted the most inquiries of public firms in the past three years were the Securities and Exchange Commission (33 percent) and the Occupational Safety and Health Administration (33 percent). Thirty percent received inquiries from state attorneys general, who handle competition, antitrust, and consumer-protection issues, among others, adds Kruse. The focus of state attorneys general on consumer issues could change in the future. Now that Congress is considering a federal price-gouging law, says Kruse, there could be a shift in regulatory focus from the state to the federal level.
Of the U.K. companies, 38 percent noted an increase in regulatory activity. About 40 percent of U.K. companies cited regulatory issues as one of the types of legal disputes that are of greatest concern, compared with only 21 percent of U.S. companies. Kruse notes that several reforms have been implemented in the United Kingdom: “In light of Enron, they’ve tried to upgrade areas of securities oversight in the U.K.”