I’m writing a book with the working title: IN-HOUSE TOM: a new target operating model for law departments – initially as a series of blogs.
You can follow the full index of the blogs as they build here: IN-HOUSE TOM: INDEX
Chapter 1.3 In-house independence is a contradiction in terms
The second reason, of seven, as to why the current target operating model is not working is because in-house lawyers, by definition, cannot “act independently” as required by the regulator and as needed by society.
The term “in-house” contains the clue to the conflict.
The independence regulation is unenforceable because through custom and practice a myth is comfortably perpetuated by business, by the profession and by the regulator that in-house and out-of-house lawyers are “the same” and that there is no difference between them in their obligation and reasonable ability to act independently.
Everyone knows this isn’t true.
Everyone is let off the hook because the onus in the regulations is on the individual lawyer to raise concerns. But turkeys don’t vote for Christmas, generally speaking, so concerns are raised by them only in extremis, a poor basis for any workable model.
This untruth, that dare not speak its name, causes three serious systemic problems concerning the current in-house target operating model:
- “the business” suffers because it needs its in-house lawyers to be independent – some would say only when it suits – and so the woolliness in their status creates a serious conduct risk for the business
- society suffers because the deception hoodwinks it into thinking that it has “cops on the inside” when it doesn’t
- in-house lawyers suffer because they are neither wholly independent nor wholly dependent; neither fish nor fowl, hence their Cinderellaesque status (see Chapter 1.2).
Legal academics acknowledge the evidence for this inherent flaw in the system:
Richard Moorhead, Steven Vaughan and Cristina Godinho helpfully and clearly set out the tortuous situation in “In-House Lawyers’ Ethics – Institutional, Legal Risk and the Tournament of Influence (Bloomsbury, 2019; pages 90-91) “…lawyer independence comprises at least four facets: first, being prepared to say ‘No’ to a client; second, an acceptance that independence may, in some situations, mean taking decisions that have negative financial consequences for the solicitor; third, a need for a solicitor to avoid becoming overly reliant or close to any given client; and finally, a recognition that, in litigation, individual lawyers are professionally responsible for their handling of cases (ie they cannot simply rely on acting in accordance with the client’s instructions to justify questionable tactics). On the third point, it might be said that having but one employer, this aspect cannot apply to the in-house community. [my Bold] However, an alternative is to see this as putting an obligation on in-house lawyers to manage more carefully for independence given the risks of having a single employer/client: to ensure they do not forget or avoid their professional obligations. This is consistent with the SRA’s recognition that the clients of large law firms pose specific risks to independence, such that they, ‘must resist client pressure which may adversely compromise their professional independence’. Only belatedly does the SRA add, though that, ‘Maintaining independence is also relevant to inhouse lawyers, who may come under pressure from their employers.”
A Curious Martian – a rhetorical device I frequently use in speeches and writing on this subject – with instant access to terabytes of data, were they to land on Earth, might ask the regulator, business and society that permits it, in respect of the above extract:
- is it reasonable to expect earthling inhousers to say “no” to their bosses on all appropriate occasions when those bosses carry out their annual reviews, rank them, control their promotion, pay and bonuses? *&%?*!!! – Martian for WTF?
- isn’t the biggest “negative financial consequence” for any earthling in-house solicitor in taking a decision, er, is to lose their jobs, complete with elegantly written NDAs?
- how can earthling solicitors, in-house and out, have the same independence obligations if they are required “to avoid becoming overly reliant or overly close to any given client”? Aren’t earthling employment contracts, cleverly crafted by other earthling lawyers, as close as earthlings can get to anyone in a work environment?
- if “on the third point it might be said that this aspect cannot apply to the in-house community” why then does the earthling regulator insist that there is no difference between in-house and out-of-house earthling lawyers if it “must be said”?
- is there not something inherently contradictory in the use of the term “employer/client”? how can earthling lawyers have clients who are also their employers and “manage more carefully for independence given the risks of having” such a combination?
- do the authors imply by the words “given the risks of having” that it’s a case of “caveat emptor” for those lawyers who choose that role when in fact the profession actively promotes in-house as a career path?
- is there not a significant difference between the independence risks faced by earthling law firms and in-house lawyers because of the difference in, er, dependence?
- why does the SRA say in-house lawyers “may come under pressure” when they must know that they do so because everyone knows it. My computer banks tell me, for example, that Professor Moorhead and others wrote a Moral Compass Survey in 2016 that confirmed that earthling in-house lawyers experience significant ethical pressure and frequently “elevated” ethical pressure?
- why did the SRA add it “belatedly”? Does this mean that “in-house” is a regulatory afterthought?
- in earthling terms, what does the word “elevated” mean and what might “elevated pressure” mean for the earthling in-house lawyer and how might the fear of it compromise their independence?
- and finally, isn’t the current earthling in-house target operating model and culture designed precisely to encourage them to “forget” their obligations to become “business people first, lawyers second…commercial…and, er, ‘pragmatic’?.
No other member of the “C-Suite” – CEO, CFO, CMO, CRO, CTO or HRD – has to suffer this systemic undermining.
Yet the C-Suite is the GC’s “client” and they usually “report” either to the CEO or CFO.
No wonder the Martian is confused.