Pearl’s wisdom

Sony Business Europe chief counsel Jonathan Pearl admits that the company is currently going through tough times because of the continued economic slump. Nevertheless, he remains upbeat. “I’m in no way concerned that my job is at stake or the company’s about to go bust,” he says. “Sony has quite a lot of fat built in and is quick on its feet.”

Sony manufactures audio, video, communications and IT products for the global consumer and professional markets. Its products range from the Walkman to semiconductors, from game consoles to medical equipment.

The company also manufactures all the broadcast equipment used to transmit pictures into people’s homes, explains Pearl. Sony has a large market share in the professional camcorder business and Pearl provides the example that around 80 per cent of the pictures being transmitted from the Iraq war onto our screens are being filmed using Sony camcorders. Sony Business Europe covers Europe, Africa and the Middle East and has nine manufacturing plants in six countries.

Pearl heads a 15-strong team of lawyers across Belgium, France, Germany, Spain and the UK. He recently hired a junior employment specialist from KLegal, because over the past five years Sony has been involved in an increasing number of industrial tribunals. “We’ve got to the stage now where, when one [industrial tribunal] comes along, it ties up a lawyer almost full time,” says Pearl.

Sony is also looking to hire a generalist lawyer to join the four already based in Berlin. So even though the company (like most of its peers) is suffering, “it is acknowledging that it needs more lawyers because turnover and the complexity of operations have grown across the globe”, emphasises Pearl.

The lawyers in Sony’s legal department have a very broad skill set and specialise principally in commercial, intellectual property, IT and employment and competition.

Pearl outsources a tiny fraction of work to external law firms, only farming out large M&A instructions or work that is highly complex. Although Pearl’s legal budget is negligible considering the size of the company, he has never exceeded the limit, because individual business divisions within Sony are invoiced directly for any large pieces of work undertaken for them by external lawyers.

“If your business is predictable then this [outsourcing of legal work] is possible,” states Pearl. “But so much of what we do is intrinsic to us understanding the new markets Sony’s getting into. By going to outside counsel, we’d end up paying for their learning curve, which they’ll use to advise our competitors.

“I don’t think it’s possible to replace in-house counsel in a company like Sony, where there’s little bureaucracy and few rules and policies, because it’s the lawyers’ job to be the risk barometer and to keep their ears close to the ground.”

Pearl does not have a legal panel and typically selects firms according to their experience in a particular area. For example, he recently instructed Denton Wilde Sapte in connection with the launch of a co-branded card business because of the firm’s reputation in this type of work; similarly, Linklaters advised Sony on a multibillion-pound commercial paper programme because of its capital markets experience.

Last year the in-house team advised Sony on a project to connect all of the UK’s prisons with all of the Magistrates’ Courts, in which Sony provided all the hardware and the networking infrastructure. None of this work was outsourced to external lawyers.

There are no internal pressures on Sony’s legal department to cut back its spending, despite the state of the world economy. “Comparatively, we’re a very cheap department,” says Pearl. “I spend on my department what the consumer sales department spends on one exhibition on one day.”

Nevertheless, the legal department took the initiative to review itself. Pearl says there was no pressure to do this, but believes it prudent to carry out such reviews on a regular basis.

“During the review, the legal department carried out subjective analyses. Are we actually making the best judgement calls? Are we concentrating on the right stuff? You can’t measure that with a calculation, but we thought we were doing pretty well on that score. Also, the feedback from the businesspeople has been great,” he explains.

After the initial review, the legal department looked at ways to calculate its contribution to Sony’s bottom line and to measure this on a quantitive basis as opposed to the traditional qualitative scale. Pearl says this was assessed in two ways: “We looked at cases that have come up and issues that have arisen and asked, if there was a lawyer on the ground would we have had those issues? We also looked at straightforward hourly charging rates by taking the department as a whole and considering how much it’s costing per hour to run a lawyer.”

Although Pearl admits that he has not found the ideal test for measuring what contribution a company’s legal department makes, he has at least confirmed that on the whole Sony’s legal department is cheaper than external lawyers.

Pearl is also the company secretary of Sony’s private equity arm Sony Venture Capital Europe (SVCE). SVCE typically invests in small technology start-ups and has invested capital funds into companies both in the UK and Europe. SVCE couples these investments with a strategic agreement that enables it to share know-how and expertise.

In June 2001, SVCE took an equity stake in a German wireless communications platform provider called Systemonic and entered into a strategic agreement with the company. Under the terms of the agreement, SVCE and Systemonic executives agreed to investigate the use of Systemonic technology to enable wireless communication capabilities in a broad range of Sony product types. In addition, Systemonic agreed to provide Sony with enhanced access to its technology and products.

Typically, SVCE does not take a lead investor role, so does not call in external lawyers for help. Currently, though, the company is working on a lead investment in Sweden and has instructed Baker & McKenzie to advise on the deal.

Pearl has been at Sony for 10 years and has been chief counsel for around two of those. Before joining Sony he worked in-house at Apple; but despite spending so much of his career at electronics companies, Pearl says he is not at all interested in gadgets and gizmos, just the law that governs them.
Jonathan Pearl
Chief counsel
Sony Business Europe

Statistics
Organisation Sony Business Europe
Sector Electronics
Turnover Over 10m (£6.9m)
Employees 16,000
Legal capability 15 lawyers across Europe
Chief counsel Jonathan Pearl
Reporting to General counsel for Sony Electronics Europe Deborah Blum
Main law firms Baker & McKenzie, Denton Wilde Sapte, Linklaters