Defining the boundaries of in-house counsel

Defining the boundaries of in-house counsel
A friend and former colleague, who has spent many years as general counsel to several organizations, recently moved into a role as chief operating officer. There is a piece in this month’s Canadian Lawyer InHouse magazine about Riccardo Trecroce, who also at one point in his career moved into the role of chief executive officer. These moves are still relatively few in number but certainly not unheard of.
During a recent lunch discussion with legal colleagues, I expressed the view that this type of move is not one I see for myself. I like being a lawyer and I like being an adviser to a business, combining my technical expertise with the enjoyment I derive from working as a member of a team contributing to the growth of an organization. Having invested a lot of years striving to be good at being a lawyer (and continuing that investment today), I am loath to give that up. In response to my assertion, one of my colleagues in private practice shot one over the bow saying, “and of course, it’s so much easier to stand on principle if you’re not the one running the company.”

I quickly conceded there was some merit in what my colleague said, because it is true that the buck stops with the CEO and those of us reporting to the CEO enjoy a degree of shelter. It is often easier to be the one giving advice than the one who has to make the tough calls. But as I pondered the issue further, I realized the mistake in the assumptions underlying the assertion.

It’s not easy to stand on principle at all, particularly when your livelihood hangs in the balance. I would venture that in-house lawyers almost never stand on principle as they do not have the luxury of it.

In-house lawyers do not give advice and walk away

An outside counsel is more often in the position of simply giving advice and walking away than his or her in-house counsel counterpart. The advice from in-house counsel can’t be given in a memo with disclaimers, without regard for the business realities or the personal consequences. An in-house lawyer who offers principled advice with no solution is doomed to fail and become irrelevant.

Business and legal approaches to ethics — in-house lawyers must cross the divide

For the most part, business people seem to separate their personal and business lives when it comes to ethics. They do things in the name of advancing the business they would not consider doing in their personal lives. In his book There’s No Such Thing As “Business” Ethics: There’s Only One Rule for Making Decisions, John Maxwell denounced the notion that there are no rules of ethics in business, taking the position that ethics are ethics whether in the business place or outside of it. Pointing to the misconduct of others and the necessity to “respond in kind or fall behind,” many business people vehemently disagree.

Lawyers are lawyers first and business people second. As such, lawyers do not have a choice when it comes to ethics and values. The assessment of professional responsibility and ethics inherent in each decision a lawyer makes is not a consideration for the average business person. Taking a position in the business environment that ethical considerations must form part of a given business decision is not just unpopular, it is often the cause of stares of absolute incomprehension or disbelief, dismissive responses, and a continuation of the conversation as though the in-house lawyer had never spoken. Ethics are often not considered relevant and even getting them into the discussion may be a gargantuan task.

In-house lawyers are obliged to make sure the right thing is done

In-house counsel are hired, evaluated, compensated, and fired by people who cannot be permitted to override their judgments about ethics and wrongdoing within the corporation. The rules of professional conduct are clear — in-house lawyers must see that right is done within an organization regardless of the personal consequences. See for example, Rule No. 2 of the Rules of Professional Conduct of the Law Society of Upper Canada:

“Once a lawyer acting for an organization learns that the organization has acted, is acting, or intends to act in a wrongful manner, then the lawyer may advise the chief executive officer and shall advise the chief legal officer of the misconduct. If the wrongful conduct is not abandoned or stopped, then the lawyer reports the matter ‘up the ladder’ of responsibility within the organization until the matter is dealt with appropriately. If the organization, despite the lawyer’s advice, continues with the wrongful conduct, then the lawyer shall withdraw from acting in the particular matter in accordance with rule 2.09. In some but not all cases, withdrawal would mean resigning from his or her position or relationship with the organization and not simply withdrawing from acting in the particular matter.” (emphasis added).

In-house lawyers as targets for regulators

That in-house lawyers don’t get to stand on principle is demonstrated by the fact they are becoming increasingly interesting targets for regulators in the United States. The Association of Corporate Counsel, in its role as advocate for the in-house legal profession, has intervened to represent the in-house perspective. See the case of Friedman v. Sebelius as an example.

The in-house practice of law can be a minefield. This challenge is part of what makes the role interesting, although I never wish for things to get too interesting for any in-house lawyer. At a recent seminar I attended on in-house legal liability, I came away with the following words of wisdom for in-house lawyers:

•    Never forget that your client is the organization.  

•    In the context of wrongdoing, personal relationships cannot matter. Never confuse your responsibility to the organization with your support for the management team or your CEO individually.

•    Wrongdoing gives rise to a clear obligation to investigate and remediate.

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