Moorhead: ethical boundaries not well drawn
Leading legal academics are developing a blueprint for ethical in-house practice, amid growing evidence that general counsel (GC) are under increasing pressure to compromise their professional ethics.
A report by Professor Richard Moorhead, director of University College, London’s Centre for Ethics and Law and Birmingham University’s Dr Steven Vaughan, Legal risk: definition, management and ethics, kicked off an ethical leadership initiative for in-house lawyers.
Ultimately the initiative will deliver a white paper on the ethical context of in-house lawyers, co-produced with Professor Stephen Mayson, an honorary law professor at UCL.
The report raised questions about the role of in-house lawyers in balancing commercial and professional considerations, and the readiness of in-house lawyers for the challenges of implementing legal risk management projects in their companies – in a context in which professional ethical boundaries are not well drawn.
The report was based on interviews with 34 senior in-house lawyers and compliance staff in large corporates and similar bodies. Among other observations, it painted a nightmarish picture of in-house lawyers struggling to maintain professional independence in an environment where they faced the daily “terror” of being perceived as “difficult” and being shunned by non-lawyer colleagues.
“Objectivity and independence are necessary for risk assessment to be accurate and useful to the business but are in tension with the pressures on in-house lawyers… The culture of ‘being commercial’ and the framing influences of a professional culture that emphasises putting the client first strains that objectivity,” it found.
It highlighted recent examples of allegations involving lawyers in and/or instructed by companies including Standard Chartered Bank, the News of the World, The Times, Barclays, BNP Paribas, and General Motors. The General Motors investigation led to lawyers losing their jobs after being blamed, among others, for not sharing information within the company on dangerous faulty ignition problems.
The research indicated problems stemmed from conflicting demands on lawyers. “As well as professional obligations to protect their independence and promote the best interest of the client, there are obligations to uphold the rule of law and the proper administration of justice.”
But they also had to consider their place in the “corporate network of influence” and the damage they would sustain to their personal standing if they were considered to be risk averse.
A “corporate discipline” operates which “reminded lawyers that they were there to support the business; that they advise and do not decide”. Some in-house lawyers interviewed had even been publicly “called out” by CEOs for being obstructive.
In general, lawyers worked in businesses which allowed only senior company officers to veto a decision. “Saying ‘no’ was… a process which required political coalition building within the business if it was to succeed. ‘No’ could be hard and dangerous work.”
Ethical red lines that individual in-house lawyers would not cross were sometimes hard to discover, the researchers found. When they were articulated, they tended to be where risks of “criminal activity” were involved, or those involving large financial consequences, and increased risk of personal injury, death, or serious environmental harm.
Professor Moorhead said: “Growing evidence… [which includes] our research and some anecdotal commentary suggests that the role of GC is under increasing pressure. Their professional ethical boundaries are not as well drawn as may be necessary for the increasingly sophisticated world of in-house work.”
Dr Vaughan observed: “One of our respondents told us, ‘In-house legal management is in its infancy’. What is also clear is that the more-for-less challenge, and the need to be commercial and influential within a business context can pose significant ethical challenges for in-house lawyers. They and their businesses are not always well prepared for such challenges.”
Paul Gilbert, chief executive of LBC Wise Counsel and one of the leaders of the ethical leadership initiative, said: “It seems fair to assume that no one relishes more regulation, and more regulation of in-house lawyers/lawyers may be inappropriate anyway, but it is interesting to note that there are no qualifications needed to be a GC, no commonly accepted guiding principles for the role, and no requirements on business to create an environment in which it is appropriate to employ in-house lawyers.”
Professor Mayson added: “This initiative is not a call for new or more regulation. It is however a call for in-house lawyers to come together… to debate the role of the GC, its ethical framework and then to suggest the principles that could guide the role.
“We are certain that in-house lawyers know best what the tough issues are and how they manage them. This is therefore a facilitated forum for debate, a place to offer and share insight, to share resources and help shape the needs of the GC as well as serving the interests of the profession and of business.”
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