This post was authored by PD Villarreal, former Senior VP of Global Litigation at GlaxoSmithKline.
Among corporate executives today there are two competing images of what an in-house lawyer should be.
On one hand, there is the widely shared view that an in-house lawyer is just a regular employee with some special training who contributes to the commercial interests of the corporation through effective use of their skills. In this view, lawyers are “enablers” of shareholder profit, albeit through use of a law degree rather than through an MBA. Their law degree, like a magician’s wand, permits a company to do things it might not otherwise be permitted to do by revealing and then exploiting the secrets of the law.
One great example of this view of the law is the famous cameo appearance of the Rule Against Perpetuities in Lawrence Kasdan’s 1981 film, Body Heat. The rule forbids a person from creating future interests in property that would vest beyond 21 years after the lifetime of those living at the time of creation of the interest. In the film, Ned Racine, a corrupt lawyer played by William Hurt, intentionally violates the rule in drafting a new will for his lover’s husband. When Racine kills the husband this supposedly makes the will invalid, resulting in the husband’s entire vast estate going to the man’s wife, Racine’s illicit lover, Matty Walker, memorably played by a breathy Kathleen Turner.
Now that is shareholder value! The lawyer finds loopholes which are “lawful” in the sense that they pass judicial review and accomplish the objectives, moral or not, of the protagonists.
To be fair, this is a perfectly reasonable and common view of what lawyers do. Use the law to play “tricks” on other people and thereby increase shareholder value. Reasonable, common, and mistaken.
First of all, (spoiler alert) Racine doesn’t get away get away with it. Second, surely when we talk about law and lawyers, we are not talking about con men pulling rabbits out of hats like arcane medieval estate rules. This view of law as a set of profitable magic tricks is fundamentally repugnant to any society’s expectations of its lawyer class. And, in fact, our lawyers are generally not as immoral as our friend, Ned Racine. However, and this is the critical point, the people who hire lawyers tend to believe that it is the lawyer’s duty to do everything legally possible and permissible to advance the commercial interests of the people who hire them, regardless of the impact on anything or anybody else.
After many years engaged in the practice of law, I have concluded that this is an archaic and dangerous view of the law, of lawyers, and their role in our society. I have come to believe that the best lawyers understand that their highest and truest service to the companies that employ them is not to discover new “magic tricks,” newer versions of the Rule Against Perpetuities, or to enrich the client’s shareholders regardless of all other social costs, but instead to better align the client’s interests and activities with those values and principles that give the client its social license to operate in the first place.
A pharmaceutical company, for example, owes its shareholders a duty to try to make money for them, but its greater mission by far is to assist the company in advancing its fundamental mission of inventing, developing, and delivering new medicines and treatments that improve the human condition. A car company must make money for its owners, but by making cars that enhance the mobility of human beings with as little negative impact on our shared environment as possible. And so on. Clients must come to understand that their long-term interests are served by the modern lawyer’s resolute focus on society’s legitimate expectations of the client. Today’s best lawyers understand this is their mission and practice their craft accordingly.
This turns out to be not a limiting principle but a liberating one.
Clients must come to understand that their long-term interests are served by the modern lawyer’s resolute focus on society’s legitimate expectations of the client. Today’s best lawyers understand this is their mission and practice their craft accordingly.
To understand that doing what is best for your company must also entail understanding what is the company’s proper role in society is an affirming moment that can give new meaning and value to our professional choices. This is the only way to create a sustainable and modern organization.
It has been my pleasure and privilege to work for companies that, by and large, have understood this. It is the job of every corporate lawyer to help their company understand that as well, to help them realize the best version of themselves. It can indeed be quite a tightrope to navigate. The demands of short-term profit are forever pulling at our sleeves saying, “pay attention to me, to me, to me.” But we must be resolute in helping the company keep its eyes on the larger picture, and to understand that only a company in harmony with society’s expectations can hope to succeed in the long run.
Perhaps, Larry Fink, CEO of Blackrock, says it best when he wrote to his fellow CEOs in the Blackrock’s annual report in 2016:
“Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth. It will remain exposed to activist campaigns that articulate a clearer goal, even if that goal serves only the shortest and narrowest of objectives. And ultimately, that company will provide subpar returns to the investors who depend on it to finance their retirement, home purchases, or higher education.”