Every year, the Association of Corporate Counsel takes the temperature of inside counsel practice by surveying general counsel and chief legal officers across a wide number of sectors. Unsurprisingly, the 2015 survey, with nearly 1,300 respondents, put ethics and compliance at the top of the list of chief legal officer concerns, together with data security, and litigation issues.
This week, we thought we’d change our pace a little and spotlight some valuable ethics lessons learned from a real-life GC who leads her department as chief legal officer of a political subdivision while also having responsibility for ethics compliance.
Within just a few months of coming on board, the GC became aware of a brewing ethics issue: facts that pointed to the potential for a conflict of interest on the part of one of the members of the client’s governing body, who appeared to have a possible financial interest in a significant transaction that the client was involved in.
How should such a situation be handled? The GC was young, and nearly brand new on the job. Yet, she well understood her duty to the client, and the requirements of Rule 1.13, which calls for action when counsel, including inside counsel, detects a situation that could put the interests of the client at risk.
As fraught as the situation was, the GC says, she knew that “we couldn’t stick our head in the sand and pretend ethics issues were not present.” Rather, her attitude was “let’s meet them head on and figure them out based upon the facts and the law that’s in front of us.”
Fortunately, the chief executive officer of the client understood the potential downside if the situation were not addressed promptly and properly. With his backing, the other members of the governing body were brought up to speed on the issue and the principles of statutory ethics law that applied to the political subdivision under the circumstances. The governing body member with the potential conflict also understood the issue. It was determined to approach the state ethics commission for guidance in the form of a formal opinion based on the particular facts.
Within a few months, the ethics commission had rendered its opinion; it was essentially a road map — “an ethics management plan,” the GC said — for how to proceed so that the client could go forward with the transaction that was so important to its future, but without having any potential conflicting interest calling the transaction into question.
The organization earned kudos for its heads-up play. “In essence,” the GC explained, “the ethics commission applauded us in coming forward to vet this ahead of time.”
The take-away? The GC emphasized that “the biggest lesson that we learned was to be proactive and to be open and transparent with the transaction but lay down what our ethics statutes were in our case, what they require and figure out how we can comply with them.”
Also, the GC stressed the role of inside counsel in educating managers and other executives of the client: “It’s a whole lot easier to educate people on the front end, just like preventative medicine. Having that education helps folks continue to act according to the ethics rules and statutes, and that certainly is a better scenario then folks acting and then trying to figure out how we fix it” on the back end.
Sounds simple, but when inside counsel is called on to navigate major issues in crucial and sensitive matters, it can be hard to put into practice. But as the GC in this situation said, “Once you lose your reputation, you can’t get it back, so I decided, let’s just address it head on and see where it falls and at least I know we tried to do the right thing according to our ethics rules and statutes. And it worked out.”