If only lawyers who lead could bill leadership by the hour…

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Economist Events

16th. Annual GC Summit

London

7th. November 2019

Ciarán Fenton

Leadership consultant

 

Focus and productivity: what are the key methods for focusing, and how can they increase your productivity?

 

Thank you to The Economist Events team for inviting me to speak this morning at their 16th. Annual GC Summit 2019.

 

They have set me a challenging topic.

 

It’s challenging because, whatever flaws lawyers are meant to have according to academic research, being unproductive isn’t one of them.

 

Over 15 years, I have worked with scores of lawyers – in-house and out: GCs, DGCs, Heads of Legal and their teams.

 

I’ve worked with managing partners, equity partners and partners in private practice.

 

I’ve even worked with barristers: silks, senior juniors, juniors and, even baby silks!

 

This pecking order alone suggests that lawyers don’t muck about when it comes to creating systems that ensure that, if you want to rise to the top, you have to work very hard indeed, and productively.

 

So while I have heard individual lawyers described as having this strength or that weakness never have I heard a lawyer described as “unproductive” in the realm of black letter law.

 

But leadership is an entirely different matter.

 

To be productive as a GC, you must know how to lead – assuming of course that you have a team to lead. I’m aware that many GCs have no teams. I’m referring to those that do.

 

Most in-house lawyers started off in private practice. Leadership is not valued in private practice because it’s not billable.

 

If only lawyers who lead could bill leadership by the hour they would be amongst the most effective senior executives in the business world.

 

Some years ago I was won a pitch to facilitate a three-day annual global legal leadership conference – about one hundred in-house lawyer-leaders drawn from a large legal function in a multi-national corporation.

 

It was a big opportunity for me. I wanted to make a good impression.

 

But on the morning of the second day of the conference after a sleepless night I announced that I had had a failure of courage the previous day – perhaps subconsciously fearful that I might not get another mandate – I announced that I should have called out the fact that I felt there was no energy whatsoever in the room for leadership, only for risk. There was an uneasy silence.

 

I asked for a show of hands from those who would admit that my impression that leadership was not top of mind at this, er, leadership conference was in fact correct.

 

To my great relief, most put up their hands. This was not an isolated incident.

So, what are the key methods of focusing as a GC and how can those methods help increase their productivity?

 

I propose one method and three tools that GCs can test for themselves if they haven’t already, to meet this need.

 

The core method I recommend is to write themselves a skeleton argument, as it were, to prove to their satisfaction the hypothesis that improving significantly their leadership capability – a combination of art and science – will, in fact, make them feel more successful and more capable as GCs.

 

The keyword in the method is “feel”. The skeleton argument starts as an intellectual process and ends as an emotional one.

 

GCs are, of course aware, intellectually, of the value of leadership training and programmes.

 

But they don’t feel as deeply connected emotionally to the art and science of leadership as they do, for example, to the art and science of litigation.

 

If perhaps they approached the skeleton argument as an exercise in proving or not that there was a significant gap in their legal education, they might come to see this exercise as a rewiring of their legal minds.

 

 

Even today there is no mandatory leadership module in law degrees, the GDL or LPC. The regulator doesn’t demand it because I suspect, the regulator doesn’t value leadership courses as highly as other courses in legal training, notwithstanding the fact that a large number of lawyers become leaders.

 

Then I suggest they test for themselves the three main components of leadership:

 

  1. Creating an environment in which the people they lead, thrive.
  2. Growing the legal function. By growing I mean making it increasingly relevant.
  3. Pleasing stakeholders. By stakeholders, I mean all of them, not just the CEO.

 

Taking these in turn:

 

First…

 

Creating an environment in which the people they lead thrive is productive behaviour and means spending time getting to know what motivates the people they lead. This varies from person to person.

 

As a test, GCs could list the psychological motivators of each of their direct reports and track how each direct report responds to the GC’s efforts at creating an environment in which those motivators were triggered.

 

At the end of the trial period, the GC would either be convinced of the approach if it worked or might need to look at raising their EQ if it didn’t work. Either way, the GC controls the tool and their own learning.

 

Second…

 

Growing the legal function is about focus. By growing, I mean making it increasingly relevant. There is only one way to make a legal function relevant, and that is to test its connection with business strategy, constantly.

 

The best tool to make Legal relevant is a business plan.

 

A business plan which sets out and fully costs a legal function’s relationship with delivering business strategy can’t fail unless of course, the GC doesn’t understand the business strategy or the business doesn’t understand legal strategy.

 

In respect of the latter and in my experience, the single biggest contributor to unproductive GCs is their failure to tell, rather than ask, the business what it needs in terms of legal counsel and process.

 

The most unproductive GCs are those who are hounded by their business. There are many recorded cases of these and far more unrecorded.

 

Third…

 

Pleasing stakeholders. By stakeholders, I mean all of them, not just the CEO.

 

The GC’s client is the board. Much has been written on this issue not least regarding the role of IHLs addressed in detail in Professor Stephen Mayson’s recently published interim report on his Independent Review of Legal Services Regulation S 5.8 the most arresting quote from which is where he states “in-house lawyers have to be able to sound alarm bells without the chilling effect of potential reprisal”.

 

He goes on to say in respect of in-house lawyers that “the public interest in effective and fearless legal representation is engaged in much the same way as it is with private practice”.

 

In that sentence, surely is a large part of what it means to be a productive GC: effective and fearless legal representation.

 

Perhaps the best focus and productivity tool available to GCs is to remember that they are Officers of the Court and not to wince, as some do when reminded of it.

 

 

Finally, at a macro level, there is an opportunity for GCs to contribute productively to the changing nature of how trading relationships are managed.

 

 

There is growing movement towards balancing shareholder value with ESG factors – environment, society and governance and it is in the area of business contracts that trading relationships receive their expression.

 

 

Earlier this week I spoke at the International Association for Contract and Commercial Management Americas IACCM Conference in Phoenix, Arizona about the impact of the 181 signatories of the Business Roundtable statement on the purpose of the corporation and other developments in ESG behaviour on boards and had an opportunity to hear the views of others on these developments.

 

 

Sally Guyer, the CEO of IACCM said in her opening remarks at the conference that “in an era where purpose has to come above shareholder value, where people want integrity…we see that it’s contracting that’s at the heart of these changes.”

 

 

And where there are contracts, there are lawyers and if GCs want to be productive at a macro level they should engage deeply in the debate around how contracting is changing to reflect new behaviour in trading relationships which increasingly have an ESG component.

 

 

If GCs want to be more focused and productive, they might consider first reframing their purpose in a changing world.

 

If they don’t, they will surely lose out.

 

If they do they will be at the heart of positive change.

 

And that’s where society wants its lawyers to be.

 

Thank you.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESGP decision-making: how boards can balance ESG and profit considerations

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Ciarán Fenton

Leadership consultant

IACCM Americas Conference

04-06 November 2019

Sheraton Grand Hotel at Wild Horse Pass

Phoenix, Arizona, USA

 

TRACK D

 

EXECUTIVE TRACK LEADING CHANGE & INNOVATION

ESGP: how can boards, in their decision making, balance the environment, society and governance with profit?

Earlier this year 181 American CEOs at The Business Roundtable issued a collective “statement on the purpose of a corporation” which abandoned shareholder primacy and pledged “a fundamental commitment to all our stakeholders”. Their announcement is just one of several from business leaders across the globe over the last few years and which has converted ESG into a “$31tn mainstream endeavour” (FT). But, if they mean it, how can this translate into a credible change in decision-making behaviour on main and operating boards across the world? Leadership consultant, Ciarán Fenton, offers a three-step process for discussion.

Ciarán Fenton Leadership Consultant, Ciaran Fenton Limited

Sally Guyer Global CEO, IACC

 

Good afternoon.

Thank you to Sally and the IACCM for inviting me to speak to you today here in Phoenix.

It’s a great pleasure.

My purpose is to propose three steps you, and your boards and teams might take in your decision-making to balance ESG and profit considerations and also to alert you and your boards, if not alert already, to the magnitude of the positive opportunities you can exploit at this unprecedented crossroads in our global economic history.

If there is anyone who still doubts that we are living through a time of unprecedented change in how business is being transacted across the world,

who still wonders if the focus on environment, society and governance issues is merely a fad which will soon fade,

who still questions the power of society to decide when pushed to do so, to create a new normal,

then part of their answer lies, even if they view it cynically, in the Statement on the Purpose of a Corporation signed last August by 181 Chief Executives of The Business Roundtable,

27 of which corporations are represented here at this IACCM Americas Conference 2019 in Phoenix, Arizona whose central theme is, fittingly, “to think ‘outside the rules’. “

Part of the answer to those who doubt also lies in Harvard Business Review’s statement which accompanied their publication recently of its prestigious ranking of the 100 best-performing CEOs in the world.

“Since 2015 [HBR says] our ranking has been based not only on financial performance but also on environmental, social, and governance (ESG) ratings.

For the past four years, we’ve weighted ESG scores to account for 20% of each CEO’s final ranking.

This year we tweaked the formula, increasing that share to 30%.”

As an aside – I wonder how meaningful, as others do, HBR’s percentages are. I mean, why not 33 and 1/3 %? Indeed why not 51% if ESG should, as I believe it will in time come first?

The statement continues:

“The shift reflects the fact that a rapidly growing number of funds and individuals now focus on far more than bottom-line metrics when they make investment decisions.

One sign of this changing sensibility [is]:

In August 2019, 181 U.S. CEOs who are members of the Business Roundtable signed a statement affirming that the purpose of a corporation is to serve not just shareholders but four other groups of stakeholders:

employees, customers, suppliers, and communities.”

And finally, part of the answer to those who doubt

is reflected in The Financial Times’ decision to launch, with a front-page wrap-around splash, in its 19 September 2019 edition

a campaign it calls The New Agenda with the headline in large font-size:

CAPITALISM.

TIME FOR A RESET.

And to help doubters, movements like B-Corp, Tomorrow’s Company and Blueprint for Better Business, to mention just three, have developed over recent years principles, frameworks and models to help businesses operate with a purpose other than purely for profit.

President Obama said, “Let us remember that, if this financial crisis taught us anything, it’s that we cannot have a thriving Wall Street while Main Street suffers.”

But, say the cynics, it’s all talk — a lot of grandiose words.

Nothing fundamental has changed.

Judge for yourself.

Just look at who’s talking.

The Business Roundtable,

Harvard Business Review

and The Financial Times

  • these are not apologists for socialism.
  • They are gladiators of capitalism, red in tooth and claw.

They’ve seen the writing on the wall.

The genie is out of the bottle. They know it and, as some might say in these parts, it ain’t going back in.

There’s plenty of evidence to support this theory.

According to the Financial Times, “ESG has moved from being a tiny cottage industry into a mainstream endeavour worth 31 trillion dollars, according to the broadest definitions”.

Since the 2008 Crash, Andrew Kasoy, one of the founders of the B-Corp legal framework which carries authorisation of the Delaware courts and which requires managers to measure environmental and social goals as well as profit, noticed that while many companies did not become B-Corps, they started to embrace the B-Corp metrics of their own accord.

Gillian Tett chair of the editorial board at The Financial Times wrote in a recent piece that

“ decades of shareholder primacy had – unsurprisingly – left labour losing out badly to capital…and [to] executives.

By 2007 CEO pay was 345.9 times that of the average worker, up from a ratio of 29.7 in 1978 – and labour’s share in the overall economic output in America (i.e. wages) had fallen steadily over the same period, even as corporate profits boomed”.

A Washinton Post piece in April stated that “Jamie Dimon, the CEO of JPMorgan Chase, made $31 million last year.

Which led to an interesting exchange between him and first-term Rep. Katie Porter (D-Calif.) …in a Capitol Hill hearing, when Porter asked [Mr] Dimon to consider the financial situation of a teller working at [Mr] Dimon’s bank in Irvine, Calif., the location of her district…

[A video of the exchange went viral]

The point is this [states the Post]

If you have a bank that’s making $9 billion in profit in a single quarter, with a CEO who makes $31 million a year, and yet people who work for that bank can’t possibly make ends meet, something is very, very wrong.”

Mr Dimon is one of the 181 signatories of the purpose statement of The Business Roundtable.

He is also its chair.

The purpose statement includes a commitment to

“Investing in our employees. [And] This starts with compensating them fairly…”

Mr Dimon’s challenge and the challenge for the 180 other signatories, who until now thought they were doing a great job and deserving of their bonuses according to the rules of Mr Milton Freidman, now find that society feels Mr Friedman’s views are not aligned with its future.

Mr Dimon didn’t make the rules, but he and his CEO colleagues can change them because if they have the power to come together and, with just one joint statement, throw Mr Milton Freidman “under the bus” then they have the power, in aggregate, perhaps more than any government, to go to the next logical step and have the courage to execute on their promise by reducing their earnings forecasts, by the cost of a properly costed ESG strategy.

They will need courage and each other’s backs because they will encounter ferocious opposition.

The Council of Institutional Investors is outraged at The Business Roundtable and thinks that “accountability to everyone, means accountability to no one”.

And some of the names on the BRT list might give rise to an arched eyebrow.

Some of the signatories have fallen off the HBR top 100 CEOS list because they didn’t move the needle sufficiently on the ESG dial last year.

It will be interesting to see how many of the 181 make next year’s HBR top 100 list with high ESG scores. That will be a test of sorts.

So, meanwhile, where does that leave senior leaders on main and operating boards, executive committees and function teams who have to get stuff done on a day-to-day basis?

all change leaves them: with a choice.

They must decide if this Well, it leaves them in the same place that stuff is for real or not and whether they believe, or not, that the direction of travel is towards ESG and not away from it.

And if they do here is my proposed three-step ESGP decision-making process on boards and teams:

Step 1: ESG Devil’s Advocate

Appoint an ESG Devil’s Advocate, by rotation, at every board and team meeting at which you are taking critical decisions giving them explicit permission to call out in detail the impact of each decision on the environment, society and governance.

By rotation, I mean that the designated Devil’s Advocate should change at each meeting, so everyone gets a chance to learn how to articulate ESG impact

For example, let’s say Decision A leads to $100 profit by disregarding ESG issues completely.

That’s what I call a P-Decision.

A profit-comes-first-decision.

In a P-Decision, the approach to ESG is “If we can do ESG stuff for free, great because that’s good for business too”

Let’s say Decision B delivers $90 profit because your board decides, like St. Augustine, that you really want to be good but not just yet, and so you choose to take only a partial ESG hit of $10.

That’s still a P-Decision because some aspect of ESG is negatively affected.

Let’s say Decision C results in an $80 profit having charged $20 for the cost not damaging the environment, or the cots of paying people fairly, or the cost of behaving ethically with good governance.

That would in my terms be an ESGP Decision.

ESG issues come first. Profit second.

So, these are your choices. You’re the Devil’s Advocate. Your job is to chair the setting out of these choices at the meeting.

Then your board can take a final decision taking full responsibility for the consequences of its impact on ESG.

Had businesses taken this approach coming up to 2008, a Global Financial Crash might have been avoided.

But the business and individual decision-makers would have made less money. They didn’t rub their hands in glee and say, “wow, let’s do that ESG thing and let’s make a killing.”

There’s no money in ethics. If there were, everyone would be falling over each other to behave ethically.

And while there’s an understandable trend to soften this message by making a causal link between ESG and better business results over the long term, the truth is that if we’re serious about ESG, our cost base will have to increase.

Because taking care of the environment, society and observing good governance properly and not in a half-hearted manner will cost money.

Step 2: Insert a line in your management accounts – i.e. your internal accounts which are not published externally – to track profits before and after ESG costs.

In the example above if your board took decision A then profit before and after ESG costs would be the same.

If your board took decision B then the profit before ESG costs would be $100 and after $90.

In decision C, the ESGP Decision, $100 profit after ESG costs would be $80.

What if all 181 signatories of the Statement on the Purpose of a Corporation together committed to this internal confidential exercise for one year?

Imagine what would happen if they then came together and announced to the stock market that they were downgrading their next year’s earnings by their estimated ESG costs. Now that would be interesting.

If shareholder value is measured in stock prices, logically these must go down if shareholder value is no longer to be maximised at the cost of ESG. Surely that makes sense?

Step 3: Agree “unwritten behaviour contracts” with your colleagues on your boards and teams to create an ESGP environment.

It’s fitting that this IACCM conference is focused on the art and science of contract and commercial management because the changes that society clearly wants in the license it gives businesses to trade with each other will only come about if people on boards and teams give each other permission through unwritten behaviour or “soft” contracts to experiment with new ways of working, without the chilling fear of reprisals from the CEO or punishment in their incentive schemes.

If the CEOs of the 181 corporations, including the 27 at this conference, gave their senior teams permission and incentives, soft and hard, to take ESGP Decisions then their Statement on the Purpose of a Corporation will be sure to go down in history…

… not as a cynical marketing exercise as some say it is

…but as a historic turning point.

THANK YOU.

 

 

#ESGP: How boards can balance #ESG and Profit (P)

BRT

There’s no money in ethics. If there were everyone would be at it. There’d be no corporate scandals because you could make more money from being good.

And of course, there are lots of studies which show the long term connection between behaving with a good social purpose and sustainability. That’s no surprise.

The problem is that there’s a danger that business will repeat the CSR trend error and try to make a business case for good behaviour. It’s dangerous. Look at how long CSR lasted.

But ESG is here to stay. Why?

First, the language is plain. It’s not management speak. Environment, society and governance are three simple words which don’t need explaining. A sure test of management speak is that you need to explain at length what the words mean in practice.

Second, “big business” and, the media which writes about it, sees the writing on the wall: Larry Fink, the 181 signatories at The Business Roundtable, HBR, the Financial Times etc. are all mainlining on “purpose”. And they’re serious. Milton Friedman and his primacy of shareholder value are, as we say back in Ireland, totally fecked.

Third, with a political landscape dominated by extreme left and right behaviour, the vacuum in the centre will be filled by those, especially young adults, who are happy to make less money provided ESG is honoured.

So sooner or later, companies will have to confront the fact that ESG costs money; that to make genuinely ESG-based decisions in the boardroom you may have to make less profit, at least in the short-term and if you don’t you may find that society, which grants your board its licence to trade, may revoke it.

So how should a board make, what I call ESGP decisions, i.e. those that prioritise the need to protect the environment, society and governance ahead of profit and to maximise profit, as it must, within that framework? It’s not hard:

Step 1 What decision would you take as a board if you ignored ESG completely? How much money would you make? If you need help with this, have a look at some of the critical decisions that led to the big corporate scandals and collapses over the last 20 years, and to the 2008 Global Financial Crash. Think about a few less well-known questionable decisions that your board has taken.

Step 2 What decision would you take as a board if you took ESG issues fully into account and had them fully costed, and how would that decision impact your P&L, in the short-term?

Step 3 What decision would your board take if it, sort of, cherrypicked the least expensive bits of ESG? Sound familiar? This, I suspect, is commonplace.

Those are the steps. But in, truth, they are options or choices for your board. And these choices may cause conflict. How prepared is your board to resolve these? Whose personality will dominate these decisions? Who will remain silent? Who will speak up? Will ESG have a Devil’s Advocate in your board room?

It’s a new way of thinking and behaving. Boards will have to unlearn old ways to learn new ones.

If your board pays men and women equally as it should, and some don’t, it hits your P&L. It’s an ESG issue. That decision or, say, a decision not to dump chemicals in your local river does not require a business case. But many feel they do and the ESG business case bandwagon is rolling.

It will soon be stopped in its tracks by reality. The direction of travel is that society is coming to expect boards to take the hit where ever it must honour ESG or it may revoke its license to trade as quickly as it is starting to abandon dear old Milton.

ESG costs. Rightly. There’s no such thing as a free ESG.

Ciarán Fenton

I will be speaking on this subject at a session to be chaired by Sally Hughes, CEO of IACCM at The IACCM Americas Conference 2019 in Phoenix, AZ, on Monday 4th. November 2019.

#SupremeCourtJudgment was a “board evaluation” of the Cabinet

Para20

The full Judgment of The Supreme Court concerning the Prorogation of Parliament was, effectively, “a board evaluation” of the Cabinet.

Can you recall the top seven decisions your management or main board took last year? Imagine if 11 experts in corporate governance and best practice leadership behaviour were to sit in judgment on the most important of those decisions? How sure would you be of a judgment “in your favour”?

The Supreme Court Judgment contains a paragraph – Para 20 – which refers to the Minutes of a Cabinet meeting held by conference call on Wednesday 28 August 2019 shortly after the Queen was advised by the Prime Minister to prorogue Parliament.

CXOs/NEDs on management and main boards keen on learning from the decision-making processes of others may find Para 20 in particular, and the entire Judgment in general, of particular interest especially since Cabinet Minutes are usually not published for 30 years.

Para 20 states: “The Prime Minister explained that it was important that they were “brought up to speed” on the decisions which had been taken”.

This implies that the Cabinet was not up to speed and therefore presumably had not entirely or fulsomely contributed, as a Cabinet, to the decision by the Prime Minister to advise the Queen to prorogue Parliament.

Amber Rudd who resigned from the Cabinet, and the Whip, not long after the decision said that “Cabinet ministers had also not been shown legal advice to the prime minister about his decision to prorogue” (BBC News website).

Para 20 continues: “In discussion at the Cabinet meeting, among points made was that “any messaging should emphasise that the plan for a Queen’s Speech was not intended to reduce parliamentary scrutiny or minimise Parliament’s opportunity to make clear its views on Brexit….Any suggestion that the Government was using this as a tactic to frustrate Parliament should be rebutted”.

This means that the Cabinet took a decision on “messaging ” concerning a decision to which it had not fully contributed.

Is this familiar? Have you sat in management and main board meetings and been brought up to speed on decisions already taken and then discussed how these should be “socialised”? I have. Many clients have too.

So what?

The point is that in business and government there has been a falling off in recent years in honouring the role and purpose of formal meetings and in following good corporate governance practice and behaviour in reducing the risk of boards and governments taking poor decisions.

In the Chilcot Report into the invasion of Iraq, the then Prime Minister was criticised for what has become known as his “sofa” style government “which meant that the Prime Minister did not face ‘frank and informed debate and challenge’ over his actions.

The House of Commons Report into the collapse of Carillion states that the “system of internal and external checks and balances are supposed to prevent board failures of the degree evident in Carillion. These all failed…The company’s non-executive directors failed to scrutinise or challenge reckless executives.”

Carillion’s directors would surely have preferred that the company had not collapsed; the then Prime Minister would have preferred the Iraq outcome to have been different, and the current Prime Minister would surely have prefered not to have to been dragged back to Parliament by The Supreme Court.

Since even small changes in decision-making behaviour might have altered those outcomes why is that those leaders and many of the CXOs and NEDs you know, and I encounter in my practice, don’t appear to be sufficiently incentivised by the risks created by their conduct to avoid unilateral decision-making?

The answer lies in their belief that they will achieve better outcomes faster if they hog all the power. Conversely, they believe that if they yield power to others or discussions, that “things” will get “bogged down”.

It boils down to a lack of trust.

In my work, I facilitate members of management and main boards to take risks in trusting each other by yielding power through formal processes and then experiencing, over time, how that trust can pay off in reduced risk events and higher chances of exploiting opportunities that are frequently missed by that lack of trust.

When people on boards for whom distrust is a default mode try out trusting each other, just a little, they connect with a capacity to take better collective decisions and more creative risks in the service of a shared purpose.

Considering the impact on your organisation of your decision-making processes, would your management and or main board survive such a judgement process? Be honest, if only with yourself.

Ciarán Fenton

Boards will ignore Section 5.8 of the LSR Interim Report at their peril

IRLSR

Professor Stephen Mayson published his Legal Services Regulation Interim Report today. He deals with in-house lawyers in Section 5.8 on page 70. The section is notable for its implicit commentary on the current context in which in-house counsel operate as it is for its specific proposals and questions regarding changes in regulations.

In the second paragraph he states:

“Analysis of the legal services market shows that a significant and increasing volume of lawyers (about 20%) and legal services are now in in-house settings. There is little doubt that a tension is inherent in this relationship when the client for legal services is also the adviser’s employer, and the usual notion of ‘independent’ legal advice is often stretched.”

This paragraph raises several questions in the mind of, say, a curious Martian were they to land on Earth today and read the report:

  • If there is “little doubt that a tension is inherent in this relationship” why has this tension not been addressed before now?
  • If the “usual notion of ‘independent’ legal advice is often stretched, why has this “stretching ” not been investigated more frequently heretofore?
  • Since the “little doubt” of which he writes is supported by ample anecdotal and written evidence of which most interested parties are aware, not least the UCL Moral Compass Survey 2016 which detailed the extent to which in-house counsel experience ethical pressure, why have boards of directors not done anything about it? 

He goes on to say:

“Equally, those advisers who are professionally qualified would typically prefer to maintain their professional independence, ethics and standards and not bow to any organisational or commercial pressures to modify their advice to make it more palatable to their internal clients. In these circumstances, it is arguable that those with professional obligations might benefit from further regulatory support (see also the discussion of ‘inverse vulnerability’ in paragraph Version: IR Final2 71 4.5.3). This could strengthen their position when dealing with internal clients, and provide an independent benchmark or standard against which to justify their professional advice. In principle, they should not be at risk of dismissal or disadvantage simply for observing their professional obligations.”

The Martian might, therefore, reasonably ask:

  • Are in-house lawyers currently at risk of dismissal or disadvantage simply for observing their professional obligations, yes or no? 
  • If no, what’s the problem?
  • If yes, why have they not by now received “further regulatory support”?

Professor Mayson moves on to governance:

“Further, effective corporate governance should ensure that in-house lawyers are able to function effectively and are supported in doing so. This might entail express conditions in their employment contract, and a direct reporting line to the Board (or to the chairman or a senior independent non-executive director).” 

He references in the footnotes a paper for discussion about best practice: “In-house lawyers and non-executive directors” by Professor Richard Moorhead and others. 

The Martian, equipped as they are with instant access to all data on the subject, might ask:

  • Why do their current contracts not include “conditions”, given the acknowledged “vulnerability”?
  • Since currently, in-house lawyer’s client is already “the board” why has no-one challenged the widespread practice of GCs reporting to CEOs and even CFOs who have unlimited power over their salaries, titles, and performance reviews?
  • And in respect of the latter and in reference to “independence” above why are they allowed to take advantage of LTIPs and Bonus schemes?

It is the final paragraph in 5.8.1 that is most shocking and might take our learned Martian by surprise:

“These are not simply private or commercial matters. As we have seen recently, corporate failures can lead to consumer and societal detriment, and in-house lawyers have to be able to sound alarm bells without the chilling effect of potential reprisal. The public interest in effective and fearless legal representation is engaged in much the same way as it is with private practice.”

The Martian might be forgiven for asking in respect of recent corporate failures:

  • Did some in-house lawyers not “sound alarm bells” because of “the chilling effect of potential reprisals”? And in what instances? Do we know?
  • Did some in-house lawyers sound the alarm bells and in fact experienced the chilling effect of reprisals? And in what cases? Do we know?
  • Since “the public interest in effective and fearless legal representation is engaged in much the same way as it is with private practice” why in respect of recent corporate failures was the public interest not protected?

The report goes on to examine the merits of separate registration and other remedies. 

However, I would encourage boards, GCs, regulators, Larry Fink and the 181 signatories of The Business Roundtable and anyone else interested in ESG to pause at the end of Section 5.8.1 and ask the question that the Martian might, again reasonably, ask:

  • While we may need to wait for a final report to propose new regulations, it’s clear that the public interest remains manifestly unprotected today; surely that can’t wait? What are boards, GCs and the profession/regulator going to do about it?

Whatever changes in regulation are agreed in future, boards would be wise to confront this issue now, before the tumbrils roll. 

There is simmering anger in some quarters in the profession because none of the above is news to them. If they came come together, tomorrow, and had each other’s backs in a manner which defies their litigation training, and demanded immediate behaviour change by Boards, under the current regulations, a good start would be made on this problem.

Boards who are relying on lawyers’ propensity to be adversarial with each other are unwise. Their anger is likely to break cover. This report may see to that. Few CEOs and boards are even aware of the problem. That’s about to change.

Ciarán Fenton

Many CEOs routinely “spiritually prorogue” their boards, and get away with it

Prorogue

Last week Prime Minister Johnson cynically prorogued Parliament. Cynical proroguing is posh parlance for thuggery. Few commentators doubt that he used his power to silence others with the potential to limit his actions.

We’re not surprised that he did so because we have come to expect cynical behaviour. Society tolerates it.

In boardrooms, where most people’s work is regulated and controlled, we have come to expect the routine silencing by CEOs of others.

In business, CEOs don’t prorogue board meetings, literally. They don’t “suspend” them. But, at times of their choosing, they may as well have done. They, effectively, silence others.

You may argue that directors on boards who remain silent have only themselves to blame. They should and can speak up. And you’d be right.

The unwritten rules of board behaviour make this problematic. It’s a spiritual silencing, not a literal one.

You and I, I’m sure, have witnessed CEOs silence others in meetings. They succeed because the silenced fear losing face, promotion, their jobs or all three.

In over 35 years of my working life, some of my standout memories are of witnessing and, sometimes experiencing, brutal acts of silencing on boards and on senior teams.

CEOs can also silence others by less brutal but frustratingly effective means: manipulating the board agenda in terms of order or content or both; doing a “Sir Humphrey” on the minutes; delaying or not sending out papers in advance, not voting on motions, and crucially, by having a weak Chair.

Since most power resides on Operating Boards, not on most Main Boards, then the CEO is the most influential person in the room because they chair operating board meetings.

So far, so what? It’s been ever thus I hear you say.

But things are changing. Cracks are appearing in the heretofore unassailable stone walls that powerfull CEOs can erect in front of those who want to challenge them. They can “prorogue” open debate as much as they like, but society is fighting back.

It’s early days, but the movement towards fairly balancing environment, society and governance with profit is gaining ground.

While the amoral behaviour of, for example, Prime Minister Johnson and President Trump is tolerated by their “base” and by those who hold their noses while applauding the outcomes of their actions, they nevertheless are creating a pressure cooker effect on those who shake their heads in disbelief and frustration.

Robert Shrimsely writes in the Financial Times (31/08/19): “Sometimes breaking a code can have greater consequences than breaking a rule. Future governments will consider the unwritten codes to have changed…the principle of “whatever it takes” is gaining supremacy…[But] there are reasons conventions survive. All sides know that the boot will one day be on the other foot…what goes around comes around”.

He’s right. Sooner or later, the bad guy gets his comeuppance.

If next week you are heading back into a work situation in which “spiritual proroguing” is systemic in your organisation or profession to the extent that you don’t expect any change any time soon, then think again.

If you have given up, don’t. I know it’s not easy, but there is hope. You can do something about it. I have witnessed and have had the privilege of facilitating previously unthinkable turnarounds in behaviour.

Society gives businesses a mandate to make a profit but not at any cost. And certainly not at the expense of your dignity, mental health and your right to a fulfilling day at work.

You are not on your own. Find others who feel as you do. Join forces with them. Share stories: feelings, needs and possible actions. Work together to find a better way. But above all: protest.

Without visible protest, we silence ourselves.

Ciarán Fenton

First 100 Days: 7 Steps for new leaders, and Mr Johnson

Boris

Pic: inews

Step 1 Google “leadership”  

Leadership is about helping other people to shine. Leaders make a lasting impact through others.

A fruitful read on this topic is HBRs 10 Must Reads On Leadership: Goleman, Drucker, Kotter, Heifetz & Laurie, Goffee & Jones, Bennis & Thomas, Collins (Jim), Rooke & Torbert, George/Sims/McLean/Mayer and Ancona/Malone/Orlikowski/Senge. 

They can’t all be wrong. 

Mr Johnson may also benefit from reading or re-reading Cabinet’s Finest Hour: The Hidden Agenda of May 1940 by David Owen. 

Whether you read the leadership books or not, remember that if you behave as “Head Of” you will have a different outcome than if you behave as a leader. 

Step 2 Know, well, the people you lead

Each is unique. So each has different needs in order to thrive. Know their needs and their personal purpose. Your leadership will thrive too. 

The assumption that bosses have rights and no obligations towards the unique characters they lead is one which lands many leaders in trouble, often to their own surprise. 

Step 3 Publish your personal purpose 

Tell everyone why you want to lead them. Be clear and honest about your personal motivation. Otherwise, you won’t gain their trust. 

And without trust, you can forget about receiving discretionary effort. 

Without discretionary effort, your leadership is doomed. 

Step 4 Agree on a shared team purpose

Don’t rush this.

Later, when team conflicts arise, as they will, you will resolve these faster if the process for agreeing your team purpose is rigorous and genuinely shared by all without exception and without pressure. 

Step 5 Agree on a shared strategy 

Spend as much time on strategy as you do on purpose. It’s difficult for people to whinge later if they coauthored the strategy.

Don’t confuse a strategy with a plan. A strategy is about how, in headline terms, you achieve your shared purpose. A plan is about how you implement your strategy.

Step 6 Agree on conduct principles 

Conduct is the collective behaviour of you and your team over time in the implementation of your shared strategy to achieve your shared purpose. 

The highest risk you face is conduct risk. Mitigate it by agreeing on a tough code of behaviour from the “get-go”. Legislate for its breach. 

Conduct Risk should be No 1 on your Risk  Register. Make sure your GC owns the Register. If the GC doesn’t understand business risk, teach them. Don’t separate business risk from legal risk. They’re interdependent. 

Step 7 Track and RAG your relationships 

List your key relationships. RAG these regularly against your shared team purpose. You are likely to have at least one Red and several Amber relationship events in the early weeks of your First Hundred Days. 

The manner in which you convert your first Red event to Green and prevent your early Amber events from turning Red will be key tests for your leadership longevity and success.

So how does this apply to Mr Johnson?

He believes that he has a clear purpose shared by his new cabinet. 

But “leaving on 31 October” isn’t a purpose. Neither is it a strategy. It’s a policy. So our new PM – whose duty is to the 100% not just the 52, has articulated no purpose at all for his government. Therefore he has no strategy 

He leads, whether he likes it or not, all the other MPs in his party. He cannot cherrypick who he leads. He will neglect those at great risk. 

Crashing out of the EU out requires nothing more strategic than having the neck to do nothing. 

His speech was silent on post-Brexit purpose and strategy other than optimism, which is neither a purpose nor a strategy. It’s a feeling. 

It will be his conduct (and his cabinet’s) that will do him in, based on past form. It’s merely a matter of when not if, he misbehaves. It gives me no pleasure to write this because we will all suffer. 

If you are a new leader this month, what’s your prediction for your First Hundred Days? 

You can exert more control over those crucial days if you commit to linking personal and organisational PSB – purpose, strategy and behaviour.  

You and Mr Johnson should carefully manage your “B” if you want to achieve your “P”.

Make sense? 

Ciarán Fenton