The Post Office scandal – where were the “non-lawyers”? Where weren’t they?

Another day, another corporate scandal – The Post Office – which raises questions, yet again, about the role and purpose of lawyers in society and their part, or not, in these scandals.

Richard Moorhead, professor of law and professional ethics at Exeter Law School, wrote in a blog, rightly uncompromisingly, that the case raised a broad range of professional issues.

“I hope that the BSB and SRA will investigate with all due alacrity not just to see if anyone should be held to account but also for the lessons that can be learned.”

He went on: “Many of the problems here are as much corporate governance problems as legal ethics problems but we should not let that fact drop between the two stools or linger for yet more years.

“If we ask the traditional question of all such scandals, Where were the lawyers? The only response is ‘Where weren’t they? Because they were either at the heart of it or ought to have been. Not solely responsible, of course, but importantly responsible.”

Paul Gilbert, Chief Executive of LBC Wise Counsel, a consultancy which works closely with in-house lawyers has written an open letter which he hopes in-house lawyers will send to their board and Executive colleagues in the light of the scandal. The final two paragraphs are as uncompromising:

“The role of lawyers in any business, including your lawyers in this business, is to protect your interests expertly and fearlessly. However, the role of lawyers can never be just about carrying out the wishes and directions of their employers. At the heart of what all lawyers do is to explicitly and diligently uphold the administration of justice. 

No matter what the business imperatives or the pressure we all feel, we hope you know and welcome that we will not be silent if we need to raise concerns or objections to a decision, policy, behaviours or course of action that undermine our duties as lawyers. 

We are proud to be employed here, and we hope you are proud to support us in fulfilling our role.”

Legal Futures reports that “Paul Harris, senior partner of Edward Fail Bradshaw & Waterson in east London, said only a full statutory inquiry could determine “how and to what extent, if any” the Post Office’s lawyers were responsible for errors or misconduct.

Mr Harris, who also acted for three of the defendants, said: “It is not clear who knew what and when and this in itself requires proper investigation.”

So, it looks like the focus of any review or investigation will, rightly, investigate regulatory breaches by lawyers, if any.

But the reviews must not stop there. They must forensically examine the chain of command linking the lawyers and “non-lawyers” at The Post Office.

They must acknowledge what Professor Stephen Mayson, author of The Independent Review of Legal Services Regulation (2020, S 4.12) called the “inherent tension” between lawyers and their employers.

And in the case of The Post Office their employers, the “non-lawyers”, are set out on the Post Office website:

“ How we run the business

Our Board

Our Board of Directors is chaired by Tim Parker. As Non- Executive Chairman he is independent both of the executive management of Post Office Limited and of its special shareholder. The Board comprises the Chairman, five other Non-Executive Directors and two Executive Directors.

Board responsibilities

The responsibilities of the Board include setting the business’ strategic aims, putting in place the leadership to deliver them, supervising the management of the business and reporting to the shareholder. There are a number of Board committees which deal with specific topics requiring independent oversight including audit, risk and compliance, nominations of the Board, pensions and senior remuneration. Each committee is chaired by a Non-Executive Director and operates within its own agreed, documented Terms of Reference

Our Group Executive

Below main Board level, the Group Executive (GE) is the most senior leadership team which is accountable to the Board for the day-to-day operations of the Post Office. It is made up of the Chief Executive and each of his direct reports together with the Company Secretary and is responsible for delivering performance measured against the corporate objectives set by the Board and agreed with the Post Office Shareholder.”

So where were these “non-lawyers” Where weren’t they?

Where were the NEDs? Where were the corporate governance checks and balances?

Who did the lawyers report to? What performance management system was used in their annual appraisals? Who decided what meetings they were allowed to attend or not? Did they experience ethical pressure? Were they allowed to do their best work? Were they heard?

The SRA will, I suspect rightly say that the Post Office lawyers should have “blown the whistle”, if they knew, because the SRA regulations require them to “act with independence”.

But the SRA knows what everyone knows: the inconvenient truth that in-house lawyers do not have the regulatory support they need to act with independence.

Despite many requests the SRA has not undertaken a Thematic Risk Review of the risks to society regarding the independence of in-house lawyers – and in this case – an appalling miscarriage of justice to individuals.

Had the SRA acted, many years ago when this matter was highlighted for the first time, then perhaps the Post Office lawyers might have been in a much stronger position (and the opportunity for misconduct or error reduced) – reporting directly to the Post Office Chair or SID and/or able to go above their heads to the SRA routinely and not in extremis, perhaps with “Officer of the Court” written into their employment contracts, and their law department regulated as a separate unit, as per the Mayson Report.

These steps might have helped avoid this catastrophe for the wronged and for what was once “a national treasure”.

But we’ll never know, will we?

Will we?

Ciarán Fenton

The New Board Game: Blog 4 Why your NEDs should heed Bob Dylan

The New Board Game

How to adapt, behave and relate in the post-pandemic boardroom

The New Board Game: Blog 4 Why your NEDs should heed Bob Dylan

Are your NEDs out of touch?

⁃ with:

⁃ your board papers?

⁃ do they read them, all, at all?

⁃ their purpose as NEDs?

⁃ which is NO different to your EDs

⁃ or do they feel that’s not “the real world”

⁃ that, c’mon, NEDs have influence

⁃ not real power

⁃ no point in proposing motions

⁃ nor calling for votes

⁃ nor calling out poor behaviour by your Chair/CXOs

⁃ ‘cos the Chair is their boss

⁃ not the Companies Acts

⁃ not the Codes & Principles

⁃ not FRC, QCA, Wates

⁃ not these

⁃ excellent law & codes, for sure

⁃ but toothless

⁃ just tick the boxes in your Board Evaluation

⁃ and have a nice glossy section on Governance in your Annual Report

– nothing will change

⁃ because no one has an incentive to change

⁃ and the good NEDs, who know how “to NED” remain in the minority

⁃ but alert NEDs know that society is changing

⁃ by #metoo #BLM

⁃ by #ESG

⁃ by the pandemic

⁃ by furlough

⁃ by COVID loans

⁃ by case law

⁃ watch as NEDs resign as their behaviour comes under scrutiny

⁃ As Bob said:

Come gather ‘round people

Wherever you roam

And admit that the waters

Around you have grown

And accept it that soon

You’ll be drenched to the bone

If your time to you is worth savin’

And you better start swimmin’

Or you’ll sink like a stone

For the times they are a-changin’

Ciarán Fenton

The New Board Game – Blog 3: Is your board disconnected?

The New Board Game

How to adapt, behave and relate in the post-pandemic boardroom

Blog 3: Is your board disconnected?

⁃ A bullying CEO/Chair rules the roost

– a brutal CXO enforcer/attack dog/lap dog

⁃ Minutes decided before meetings

⁃ No calling out of unacceptable behaviour

⁃ No challenge on dodgy decisions

⁃ Decisions stitched up without debate

⁃ Lawyers ignored

⁃ Shaming and humiliation – the norm

⁃ Exclusive focus on the bottom line/the numbers/quarterly statement

⁃ People viewed as human resources, capital assets, “ours”

⁃ Shareholder returns, investor “exits”, LTIPs driving behaviour

⁃ Barely concealed misogyny

⁃ Open racism: D&I a chore

⁃ Families irrelevant

⁃ Stress, fatigue, burn-out: a badge of honour

⁃ Fear & anxiety constant companions

⁃ Sleepless nights before and (worse) after board meetings

⁃ Sleights, real and imagined, dominate

⁃ Personality feuds fed

⁃ Schadenfreude ever present

⁃ Emails and texts micro-examined

⁃ wtf did he mean by that ellipsis…?

⁃ And it’s all multiplied 100x on Zoom

⁃ The pandemic has hit our P&L, badly

⁃ Saved only by furlough – phew, but of course, there’s the rub.

⁃ The seeds of societal disruption visiting a boardroom near you…

Ciarán Fenton

The New Board Game Blog 2: Less profit, more impact

The New Board Game

How to adapt, behave, and relate in the post-pandemic boardroom

Your board will need to focus on making less money

  • a bit shocking that, isn’t it?
  • I mean, maximising profit has been the mantra of boards forever. How could this possibly change?
  • The system is geared towards a laser focus on the bottom line: incentives, bonuses, options
  • The markets keep score based on valuations based on profit
  • Investors want an exit at the highest return
  • Even the most pro-ESG commentators link “doing good” with the logic that it will drive higher profit
  • ESG is good for business, don’t they say?

It’s all tosh.

If there was money in ESG, everyone would be “at it” already

  • taking care of the environment, properly, costs money
  • The E in ESG will hit your P&L
  • paying/hiring/treating employees equally, fairly, and inclusively costs money
  • The S in ESG will hit your P&L
  • good governance costs money because doing the wrong thing makes people very rich
  • The G in ESG will hit your P&L
  • if your profitability improves because of these costs – it may/may not – that will be a collateral benefit/cost of ESG and not a business case

ESG doesn’t need a business case, so stop making one

  • You don’t make a business case for an elevator in your office block, do you?
  • You don’t make a business case for wifi, do you?
  • You don’t make a business case for maternity/paternity leave, do you?
  • Protecting the environment is becoming no longer optional for boards
  • Nor is protecting society any longer a buy/don’t buy decision
  • Nor is good governance an a la carte exercise.

There will be a new heading in your P&L narrative: impact of ESG costs on profit and reputation. Are you ready for those conversations in your boardroom?

Ciarán Fenton

The New Board Game: Blog 1 – What’s new?

The New Board Game

How to adapt, behave and relate in the post-pandemic boardroom

Blog 1 – What’s new?

Nothing, fundamentally, you could argue.

– the scorekeeping is the same

– the FTSE, NYSE, DAX etc. haven’t changed their calculus a jot

– accounting rules remain, largely, unchanged

– EBITDA means the same now as it did before the pandemic

– Ditto ROI

– company law is broadly the same

– so, boardroom behaviour in regard to these factors hasn’t had to change.

– Why would it?

– what’s measured continues to be delivered

But the context has changed, irrevocably

– the ESG wagons were rolling long before the pandemic, now they’re picking up speed because of it

– impact investing, green-washed or not, has notched trillions

– companies that take state aid and ignore the environment, society and governance issues are attracting the spotlight

– state bailouts have scotched the notion that business is somehow apart from the state and society

– gladiators of capitalism – The Financial Times, Larry Fink, The Business Roundtable etc. are all talking about relaunching capitalism

– young people are, to use an Americanism, seriously pissed with corporate behaviour

– above all, customers, employees and supply chains are demanding change.

If you are a member of a board – main or management – or aspiring to be one, then you have a choice: either you wait for the game and it’s rules to change officially or you decide that the game has already changed and the rules will catch up in due course and you start to adapt your behaviour to the new game now, or not.

Ciarán Fenton