Legal Business Blogs

Comment: Going native – ethics and the modern GC

The in-house profession has doubled in size in the UK over the last 15 years and gained once unthinkable levels of influence in delivering legal services to corporate Britain. And what have the profession and its watchdogs done to recognise that seismic shift in the legal industry, with all its far-reaching ethical implications? Pretty much nothing.

As Legal Business reported last month, a band of academics and in-house veterans are trying to fill this void with the report, ‘Legal Risk: Definition, Management and Ethics‘, billed as the start of a wider conversation around the ethical standards and framework that in-house counsel employ.

The report – by UCL professor Richard Moorhead and Steven Vaughan of the University of Birmingham – found widely varying attitudes, processes and ethical standards among the 34 senior in-house counsel and compliance professionals interviewed.

Even when in-house counsel were applying a robust stance to managing legal risk, there was a lack of consensus about basic issues, such as how to handle or define legal risk and even the appropriate role of the general counsel (GC).

The research also only confirmed what anyone who deals with GCs already knows: in-house lawyers come under considerable organisational pressure to adapt with the risk appetite and ethical world view of their employers.

Moorhead describes this as the ‘tournament of influence’ – the battle for status in-house counsel are particularly aware of as they are still often treated as outsiders.

The research found that in-house counsel were quite often adopting positions that were not only ethically questionable but in some cases in outright conflict with their professional obligations. A common theme was being pressured to sign off on actions ‘stretching at the borders of legality’, with one interviewee going so far as to state: ‘I don’t have red lines. I don’t have any absolute nos. That’s me taking a risk, isn’t it?’

The desire for status – to have a seat at the table – is palpable, understandable and potentially disastrous.

In-house counsel are all the more vulnerable to such pressures as the profession and its regulators have spent so little time defining what the role means, even as large sections of legal work have transferred from private practice to in-house legal teams.

It should be hoped that this attempt to start a discussion wins some support, but given the legal profession’s path-of-least-resistance stance in such situations and the incentives at play, that seems unlikely.

In-house counsel have come a long way in recent years in raising standards and ambitions, but they have also become more submerged in their businesses and are urged from all sides – almost without question – to be ‘engaged’ and ‘commercial’. The desire for status – to have a seat at the table – is palpable, understandable and potentially disastrous.

The basic issue is that the in-house profession is materially less transparent and independent than private practice. Much of the scrutiny that can unearth problems in law firms has no equivalent in-house. These are ideal conditions to facilitate governance failures and given the run of recent corporate scandals that have caught up in-house lawyers, this is less an accident waiting to happen as one that is happening right now.

That’s not to suggest that the solution is a highly prescriptive overhaul of regulation, but a frank discussion and acknowledgement of the situation would be a constructive start. But don’t hold your breath.