I attended an interesting event on Tuesday organised by the UCL Centre for Ethics & Law, who were launching their Ethical Leadership Initiative on the role of inhouse lawyers, especially general counsel. You can read a report of the event here.
UCL were presenting the results of a research project they have carried out on inhouse lawyers’ approaches to legal risk, and this was followed by presentations from other panel members (including Enid Rowlands, chair of the SRA, and John Sutherland of the Prudential Regulation Authority) . A lively audience discussion followed.
Here are some of the points made during the evening that particularly struck me (not attributed to particular speakers, as the event was held under the Chatham House Rule):
- Risk management among inhouse lawyers “tends to be ad hoc, experiential and intuitive”.
- Lawyers take differing approaches to risk: some are “risk resistors” (“just say no”); some are “risk technicians” (who see it as their job to manage and mitigate risk, rather than eliminate it); some are actively “risk takers”. Overall, though, the legal team’s appetite for risk is generally determined by the business rather than vice versa.
- Are there ethical challenges to being an inhouse lawyer? Interestingly, the research showed that lawyers were more likely, not less, to be concerned about ethical questions in their role if they saw the law as “ambiguous” (rather than “binary”) and if they preferred a “commercial and pragmatic” approach to an arm’s-length, “I advise, the client acts” attitude.
- Regulators have generally ignored inhouse lawyers until now, but this is going to change with the next revision of the Solicitors’ Handbook, which will seek to tackle previously ignored questions such as: What does “independence” mean for an inhouse lawyer? What is the purpose of a GC, or of an inhouse lawyer generally? How do you manage the raising of concerns about a business’s activities?
- Inhouse solicitors are often very aware of the need to be “independent”, but are less conscious of the wider professional obligations that we remain under even when working inhouse, such as: to uphold the rule of law; to act with integrity; to act in the best interests of each client; and to behave in a way that maintains the trust the public places in you and in the provision of legal services.
Some of the most useful points made related to how we categorise and assess risk:
- What are the “Category 1” risks to your business (the greatest risks, with the highest potential impact)? What are the “Category 5” risks (low impact)? You need to assess this for each of your business’s main operating models.
- The areas of most rapid growth in your business are likely to be the areas where unseen risks are building up – partly because no one likes to be seen as hindering “success” by raising boring questions of compliance and risk.
There was also an interesting, brief presentation of the Behaviour Change Wheel (which illustrates this post).
Perhaps the most important message, though, was the need to align incentives with the ethical and risk outcomes you are looking for in your business. In particular:
- What do people get paid for?
- How do people get promoted?
One speaker quoted the title of a classic 1975 paper: “the folly of rewarding A while hoping for B.” A lesson that probably has yet to sink in for a lot of people…