From Corporate Counsel

The announced retirement of ExxonMobil’s general counsel, Jack Balagia, sheds light on a practice that is common at law firms but less known at corporate legal departments: mandatory retirement policies.

Balagia will retire Nov. 1, shortly after he turned 65, Exxon’s required retirement age. He has been with the company more than 18 years, the last six as its top lawyer.

Although mandatory retirement generally is illegal under federal law, there are exceptions for certain bona fide executives and employees in a high policy-making position—a classification that could apply to some companies’ GCs. However, because that definition leaves much room for interpretation, “many companies simply say, ‘We’re not going to fight this battle,’ so they don’t have a mandatory policy,” says James McClain, a longtime general counsel at a Texas company now with the law firm Palmer & Manuel.

For that reason, it tends to be the larger companies, where distinctions as to who qualifies for the exception are clearer, that implement the policies, McClain says. They’re also more common at “legacy companies, where they’ve been around so long that the expectation is that someone’s going to stay until they retire” at the mandatory age, adds Sterling Miller, former general counsel at Travelocity and now a lawyer at the firm Hilgers Graben.

“At the newer companies, it’s just not the way the world is. They bring a whole different sensibility,” says Miller, adding that he is interested to see if Balagia’s presumably younger successor at Exxon will bring this perspective to the issue and try to change the policy.

But even large, legacy companies often don’t force GCs to retire. Neither UPS Inc. nor The Coca-Cola Co. has mandatory retirement policies. Home Depot requires nonemployee members of its board of directors to retire at age 72.

One reason not to implement these policies, McClain says, is that forced retirement could upset some GCs who think they still have a lot to offer. “Lawyers leave an organization with a lot of stuff in their head, so you don’t want them going out there mad at you,” he says.

Ben Heineman Jr., the former general counsel at General Electric, says a policy like Home Depot’s makes sense because individuals at the very top of an organization, such as board members, are not subject to performance evaluations by higher-ranking employees. But in cases of GCs, where higher-ups such as the board or CEO can determine whether the employee is continuing to do a good job, “hard-and-fast personnel rules are generally not consistent with good management,” he says.

A mandatory retirement age is useful as a presumption, so long as it accompanied by a “hard look” at the entire situation, Heineman adds.

“I think all personnel decisions ought to be made about the individual person and what their capacities are and the needs of the organization are at the time,” he says.

Legal Notice