Why CEOs should reset their relationship with their lawyers during COVID-19

The role of lawyers in the day-to-day running of a business is to enable better business decisions through excellent legal counsel and process.

During COVID-19, and in its aftermath, businesses need their lawyers more than ever to reduce risks and maximise innovation in adversity.

Decisions which are taken by CEOs, boards and teams under extreme stress are more prone to error than in normal times; executives at all levels may abandon standard legal processes in favour of shortcuts; communication and consultation suffer.

There is anecdotal evidence that some early stage and rapid growth organisations have decided they “no longer need a General Counsel” relying instead on more junior and potentially more biddable in-house lawyers or more arms-length external law firms; that CEOs and senior executives are not inviting in-house lawyers to crucial meetings and finally that some lawyers are pulling back from their usual habit of checking that their advice is being followed because they feel such probing is not welcomed.

Based on my and other consultants’ experience in working, writing and speaking with and about lawyers and their relationships with CEOs, their boards and teams I suspect that the actual situation is far, far, worse than the anecdotal evidence suggests.

If you are a CEO, you should be worried about the top and emerging risks that this reality presents to your organisation.

The reason I’m so sure that during COVID-19 these risks on your Risk Register, if it’s up to date, are not green, not amber but red for your organisation is that, in normal times, CEOs, boards, teams, lawyers and regulators failed to confront what everyone knew and knows to be true: that the relationship between commercial lawyers and CEOs, boards and teams is broken and has been broken since at least the 1970s in respect of the long-term sustainability of businesses and the interests of society.

This evidence that everyone knows and knew is contained in detailed academic research, surveys and case law. But you don’t need these. Just listen to lawyers’ stories or ask CEOs about the problem as I and others have done. The lawyers’ stories are chilling. If even 10% of what “goes on” were to reach the front pages of the newspapers there would be a public outcry.

Conversely, ask CEOs about the problem as I and others have done and you’ll find them living in a parallel universe with no insight into the danger of their of collusion, conscious or not, with a lie.

The lie is that society believes in good faith that, when push comes to shove, in-house commercial lawyers always act independently of their CEOs, boards and teams if in-house. They don’t. And sometimes out-of-house law firms don’t either.

If a lawyer reports to you as CEO, then you control them. In career terms you effectively own them. That’s what “reporting to” means. It’s not just their pay and rations you control, or their annual reviews and performance scores but their career advancement and sense of personal fulfilment.

And yet your in-house lawyer is an Officer of the Court with powers that no one else in your organisation holds including the power to have a privileged conversation with you and an obligation by their regulator to act independently. The regulator leaves it up to the lawyer “to report anything” which leaves the regulator off the hook.

Think about it for just a minute. How can your lawyer who reports to you act independently of you when it’s as clear as day that they depend on you so much?

Many lawyers will protest that they do stand up to their CEOs as I’m sure they do, but many don’t or feel they can’t and in any event, doing so shouldn’t be exceptional. It should be business as usual. It isn’t.

None of this would matter so much because it’s gone on for more years and would go on more years but for the coronavirus pandemic. This is a game-changer. Normal rules don’t apply.

Just as successive governments failed to prepare for a pandemic, lawyers in-house and out, CEOs, boards, teams and regulators failed to create an environment in which the independence of in-house lawyers is enforceable.

If I were in your position as a COVID-19 CEO, and since you can’t fix this mess created by all parties, I would act now and take three decisions:

  • change your in-house lawyer’s reporting line from you to the board via the Chair. Do it today.
  • ask your board to explain to them how it intends to reframe the organisation’s purpose, strategy and behaviour plan in the light of COVID-19
  • ask, don’t tell them, what legal counsel and process they feel is needed to achieve those outcomes; listen to them; keep them in the room. 

Then get out of their way. 

And if lawyers fail to deliver, they will no longer be able to blame you, as in some part at least, they can blame you now.

Ciarán Fenton

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