Whenever a significant corporate scandal occurs, an early question posed by most everyone is: Where were the lawyers? This question rests on the not unreasonable tenet that lawyers, who after all swear an oath to uphold the rule of law, can, should and must prevent corporate scandals from happening. Moreover, the truth is that in-house counsel often seem particularly well-positioned to prevent unethical corporate behaviour.
That well positioned counsel can prevent wrongdoing is unfortunately only part of the story. For one thing corporate scandals are not the norm. Instead, they often are both symptom and outcome of deeper organizational problems and toxic corporate cultures.
Even if a lawyer is both conscientious and proactively diligent, problems will persist. Why? Because of what the lawyer doesn’t – or more specifically what the lawyer was not told. A lawyer is only as good as what their client tells them. The telling question is what has the lawyer been told This is where the real problem lies both literally and figuratively. Even a lawyer who intends to become a “watchdog” and act as the ethical enforcer, what are the odds that lawyer will actually be given enough information to intervene meaningfully in a growing corporate scandal?
The challenge then is bridging the information gap between counsel and corporation. This is easier said than done however. Attempting to address corporate failure by imposing additional “reporting-up” duties onto lawyers may be misguided, for it fails to adequately address the responsibility of the primary decision makers in a corporation, mainly senior officers and directors.
Accordingly, we perhaps ought to focus attention on the responsibilities of key decision-makers to be transparent with their in-house counsel. One way this could be achieved is by requiring directors and officers to have in-house counsel present for major decision-making. In theory, such a duty to inform would ensure that lawyers can do their jobs correctly and corporations are more legally compliant. No longer could in-house counsel turn a blind eye to corporate misconduct. The improvements in information flow should inevitably lead to better legal oversight and fewer corporate scandals.
How to craft such a requirement remains to be seen. Expecting lawyers to be company saviors in toxic corporate environments without addressing the widespread organizational problems underlying these scandals scapegoats lawyers. Codes of Professional Conduct already ensure that lawyers act in an ethical manner. Bridging the information gap can finally will provide an answer to the abusive question: “Where were the lawyers?”
Jordan Paul
