Professional Independence and the Corporate Lawyer
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Description
Quickly following the shock and anger engendered by the collapse of the Enron Corporation came the accusations. Directed principally to the senior officers and auditors of the company, the accusations rippled out: “Where was the board?” “Where was the SEC?” As famously put by Judge Stanley Sporkin years earlier, when confronted with the evidence that Charles Keating had operated Lincoln Savings & Loan as a massive fraud, “Where were the lawyers?” The charge against Enron’s auditor was easy to grasp: Arthur Andersen’s independence appeared to have been fatally infected, both by the huge audit fee that Enron generated and by the steady and substantial flow of nonaudit services. The auditor was seduced into complicity by large fees. Independence is the sine qua non of a public auditor, and when it is gone, the utility of the auditor’s service dissipates. Lawyers are different, and that difference has spared them from much of the criticism that has been directed at auditors. The core duty of a lawyer runs not to the public or to public markers but to the lawyer’s client. The conception of the lawyer that dominates all others is that of the “zealous advocate.” Under this ideal of undivided loyalty, the attorney is bound to defend the client with every legitimate means at his disposal. This conception of a lawyer’s duty has powerfully beneficial social effects. We value these benefits most keenly in the setting of a criminal prosecution. There the power of the state is arrayed against a single individual, and the liberty or even the life of that single person may stand in the balance. The ideal of pure and energetic loyalty originates with the lawyer in his role of defender of those under attack. As zealous advocates, lawyers are viewed in their most romantic and selfless state (John Adams defending British soldiers for acts at Bunker Hill; the heroic lawyers who stood against racial and ethnic prejudice in the Scottsboro Boys trial, or in the defense of the ill-fated Leo Franks). But the mentality of the zealous advocate that inspires our admiration in some settings can lead to unprofessional conduct in others. In the litigation setting, the lawyer’s imaginative arguments will be tested in a process that provides a range of counterbalances, from the discovery processes and cross-examination to informed counterarguments before a disinterested and expert arbiter. Removed from these safeguards and inserted into the process of the corporate lawyer in advising about prospective actions, this mentality can prove damaging to lawyer and client alike. To be sure, in giving such advice, lawyers are under an ethical constraint. An attorney may assist a client in carrying out a course of action that skirts the edge of the permissible only so long as the attorney believes in good faith that the action is, in fact, legally valid and the client is aware of the legal risks. The effectiveness of this restraint, however, depends largely upon the business lawyer’s own willingness to make it effective. Therefore, the conditions under which the business lawyer practices are highly relevant to the profession’s ability and willingness to act as a constraint on corporate clients’ assuming unreasonable degrees of legal risk. There is good reason to believe that under the profession’s present circumstances, business lawyers—those who represented Enron, Worldcom, Tyco, HealthSouth, and their banks—have been forced by circumstances and zeitgeist to take the narrowest possible zealous advocate view of their duty to the law itself. We suggest that the evolution of the legal profession over the last half century—from what we call a “club” form to a “market” form of organization—has produced conditions that (1) atrophied the profession’s acknowledgment of a duty to respect the discernible animating the positive law (for this one way we articulate the duty of good faith) and (2) reduced the leverage of practicing lawyers to influence their clients’ willingness to assume unreasonable legal risks. In this summary of a longer piece in process, we outline the changes in the environment that have produced these effects and suggest a few governance modifications, both in corporate clients’ governance and in law firm organization,that may restore a bit of the lost ability of business lawyers to act with professional independence. It should be stated, however, that we do not intend for our generalizations concerning the effects of a changing environment on business lawyers’ incentives to be understood as a charge against the moral character of business lawyers as a class.
Source Publication
Restoring Trust in American Business
Source Editors/Authors
Jay W. Lorsch, Leslie Berlowitz, Andy Zelleke
Publication Date
2005
Recommended Citation
Allen, William T. and Miller, Geoffrey P., "Professional Independence and the Corporate Lawyer" (2005). Faculty Chapters. 2022.
https://gretchen.law.nyu.edu/fac-chapt/2022
