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In-house Division

Isn’t it time that in-house lawyers re-launched the legal function?

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Ciarán Fenton says it’s time to redefine the role and purpose of the legal function to reflect the relationship between in-house lawyers and their business leaders.

Would it be reasonable for a curious Martian to ask in-house lawyers where they were when their business leaders took the decisions that led to their corporate scandals?

The stock answer is: ‘We were not in the room.’ Very often, they were not. But that does not explain, fully, why so many major brands with top class in-house legal teams still got into serious trouble, and continue to do so.

The relationship between legal functions and their boards is brittle, at best. In a 2016 survey of 400 in-house lawyers by the UCL Centre for Law and Ethics:

  • 10-15 per cent experienced ‘elevated ethical pressure’
  • 30-40 per cent ‘sometimes experienced ethical pressure’
  • close to 50 per cent agreed that ‘actions were sometimes taken against their advice on legally important matters’.

Furthermore, for 65 per cent, ‘achieving what the organisation wants has to be their main priority’.

Surely, the priority of an in-house lawyer must be to provide, in their professional opinion, the best legal counsel and process appropriate to the objectives of the business? Surely, the lawyer must tell the business what legal services it needs? Surely, lawyers should not experience ethical pressure of any description whatsoever?

The authors of the survey found that there were four categories of in-house lawyer: the capitulators; the coasters; the comfortably numb and the champions. While the category names speak for themselves, the Martian might reasonably wonder why there are four, and not one.

But had the Martian attended in-house legal conferences and workshops over the last ten years, they would understand the cause of the problem. These conferences are, usually, dominated by three questions, which are never fully answered.

1. How can the legal function reduce costs?

The favoured phrase is ‘how can we do more for less’, as if their default position is to do less for more.

2. How can we demonstrate value to the business and ensure a seat at the table?

If lawyers have to work so hard to demonstrate their value, is it a surprise that they were not ‘at the table … in the room’ when the fatal decisions were made?

3. How can in-house lawyers become more commercial – business people first, lawyers second?

Some years ago, one in-house counsel who spoke on this topic to hearty applause from peers was later forced to reverse that order when the business he worked for was embroiled in a major scandal. It was ‘lawyer first’ then, no question.

Meanwhile, business leaders feel frustrated. After all, they say, the legal profession created this class of lawyer who happily takes their salary, annual holidays and pensions, but is often ‘not commercial enough … lack leadership skills … and don’t understand the business’.

They struggle to understand why the legal function should not behave exactly like like the other main functions – finance, marketing, sales, operations, IT and HR. Why, they might reasonably ask, don’t the accountants call themselves ‘in-house accountants’? What’s so special about lawyers?

As one CEO said, in exasperation: ‘All I want the legal function to do is to anticipate risk.’ Another reportedly quipped, somewhat tongue in cheek (though not entirely): ‘Your job is to make what we do legal.’

A new understanding

This dysfunctional, conflicted relationship serves no one. It’s time to reframe the role and purpose of the legal function to reflect the relationship between in-house lawyers and their business leaders in a new memorandum of understanding. This MOU would be based on three principles.

First, all parties would acknowledge that in-house lawyers are officers of the court working within the business for its protection, at all times. They are special. They are different.

Second, the legal function should tell, not ask, the business what legal counsel and services it needs, and seek to find the best price it can to deliver those services.

Third, since businesses will inevitably wish to spend less on legal services than the legal function needs, they must accept the risks in doing so. In-house lawyers must stop doing work they are not paid to do.

This last step would be the greatest hurdle because, despite their public perception, lawyers are trained to ‘get it done, no matter what’. High stress levels are common.

I set out the ideas above at a speech to the GC Futures Summit 2017, and was surprised by the strength of response. The video of my speech on LinkedIn has received over 15,000 views and extensive comments. Clearly, there is interest in this issue.

But will anything change? Not unless and until the legal profession starts the painful process of re-launching the legal function, which emerged, incrementally, from a private practice model.

One way to accelerate this is to increase the number of conferences at which there are an equal number of business and lawyer delegates. I have launched The GC-CXO Forum as my contribution to this process.

Sooner or later, the legal function will have to confront the nature of its contractual relationship with the business. It may have already compromised itself: for example, by participating in some performance incentive schemes. Surely, lawyers cannot be said to be acting independently if they are giving advice on contracts that could impact on their bonuses?

These are inconvenient truths, but they must be faced, and in a manner that a curious Martian might understand.

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About the In-house Division

Your In-house Division is dedicated to meeting the needs of in-house lawyers working in the corporate and public sectors, not-for-profit organisations and charities.

See our 2017/18 Engagement Programme.