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Abstract:
The word "Enron" has become shorthand to refer to corporate wrongdoing in the first years of the twenty-first century. Aside from the dizzying heights from which it fell, Enron was notable for the intricacy of the misbehavior in which it engaged. The company created elaborate organizational structures, often with multiple layers of control, that were intended to use legal form to disguise economic substance.

Such manipulation of form obviously required the services of many lawyers. Transactional lawyers in particular have expertise in fashioning elaborate permutations of form that the law will honor, even if the result is not entirely congruent with underlying economic substance. It's reasonable therefore to assume that lawyers' fingerprints were on Enron's arrangements perhaps more than in any other recent corporate scandal.

Much of the commentary on Enron's attorneys has focused on whether these lawyers violated ethical rules or other legal provisions, and on how the law governing attorney conduct might be strengthened to prevent future transgressions. This commentary generally has been thoughtful and valuable as far as it goes. The application of legal rules, however, is triggered by the existence of certain facts - and the perception that these facts exist is the result of a complicated process. This suggests that we may gain particularly rich insights into the complexity of ethical judgment by trying to understand circumstances as lawyers themselves may have seen them. Proposed transactions don't come labeled as problematic and intricate legal structures rarely are obviously fraudulent. Those characterizations are conclusions that are the product of a complex process of perception that organizes information in particular ways based on factors such as situational cues and personal predilections. Behaving ethically requires cultivating powers of perception that are sensitive to and recognize events that carry ethical significance.

Gaining an appreciation of the circumstances in which a given set of lawyers operated can be difficult, because it requires access to details about the texture of practice that often are unavailable. In the case of Enron, however, the Bankruptcy Court appointed an Examiner to review many of Enron's transactions. Of particular interest, the Examiner's final report contains an Appendix that discusses possible causes of action that Enron might have against its inside and outside legal counsel, along with potential defenses to these claims.

The Examiner's reports constitute one of the most detailed accounts available of the activities of transactional lawyers as they worked on matters that later were deemed fraudulent, in some cases criminally so. This article discusses several transactions that the Examiner scrutinized. These represent only a portion of the transactions that the Examiner analyzed, but constitute a large number of the transactions with respect to which he focused on the conduct of attorneys. My aim is not to evaluate these attorneys' possible liability. Rather, my goal is to try to imagine the world as these lawyers may have seen it at the time the events unfolded. What influences shaped their perception of what was occurring? To what situational cues were they sensitive or blind, and why? How might they have interpreted information that in retrospect seems incriminating? What precisely does it mean, in other words, to say that Enron's lawyers "blessed," "signed off" on, or "approved" the company's transactions? Are these conclusions consistent with how the flow of events unfolded?

Addressing these questions ideally will shed light on broader issues. When are circumstances likely to suggest that an ethical question has arisen? What kinds of factors enhance or obscure the ability to recognize this? What rationalizations tend to be available in what circumstances which provide reassurance that nothing is amiss?

The article suggests that transactional lawyers may face a distinctive ethical challenge because their stock in trade is the creative manipulation of legal form. Law's tolerance of some divergence between legal form and economic substance helps create a background assumption that such divergence is normal and not problematic. At some point the divergence becomes wide enough that the law will treat it as fraud. The working assumption that divergence is normal, however, means that it may take something striking for a transactional lawyer to conclude that this point has been reached. When we add the common tendency to engage in self-serving rationalization to the picture, the perceptual problem becomes even more challenging. My hope is that engaging in a close analysis of the work of Enron's lawyers on specific transactions will suggest how Enron might be used as a case study that makes lawyers and law students more sensitive to the process of exercising judgment in ambiguous situations in which wrongdoing is not apparent on its face.

Abstract:
Despite the fact that a substantial number of lawyers work in law firms and corporate legal departments representing business corporations, up to now there has been no major casebook that addresses the distinctive issues of ethics and judgment that such lawyers face. "Legal Ethics and Corporate Practice," by Georgetown Law professors Milton C. Regan, Jr. and Jeffrey Bauman addresses this need.

The numerous corporate scandals over the past few years underscore that corporate representation today is perhaps more complex, challenging, and socially important than ever before. Legal Ethics and Corporate Practice aims to enhance the ability of lawyers to operate effectively in this environment. First, the book is organized primarily around the kinds of work that corporate lawyers do rather than around traditional ethical concepts. Chapters deal with matters such as securities regulation and disclosure, negotiations, legal opinions, regulatory counseling and compliance, internal investigations, mergers and acquisitions, shareholder litigation, and many others. The book includes a chapter on the work of Enron's in-house and outside counsel as a vehicle for examining the kinds of questions that arise in legal work on complex transactions. Students thus learn how different types of tasks generate a range of issues that cut across ethical categories.

Second, the book exposes students to the latest thinking and research on the social-psychological dynamics of organizational settings, different theories of the lawyer's role, competing conceptions of corporate responsibility, the history and structure of corporate legal departments and large law firms, and different concepts of moral accountability. This material helps place corporate practice in a broader social, economic, and cultural context.

Finally, the book uses problems as the main focus of discussion and analysis as a way of prompting students to draw on the practical and conceptual material to which they have been exposed. This approach is designed to make students sensitive to the numerous ethical, legal, practical, and organizational factors that lawyers must take into account when engaged in creative problem-solving.

In addition to its obvious relevance for students who plan to spend time in law firms or business organizations, the book also can serve as an effective way for any law student to learn legal ethics. Appreciating the texture of daily law practice should make ethical concepts more vivid for students. Ideally, it will help them develop a more sophisticated capacity to identify and deliberate about ethical issues as they are likely to arise in concrete settings in perhaps the most common attorney-client relationship.

Abstract:
This paper is an exchange among Bruce Macewen, Milton Regan and Larry Ribstein on the potential implications of pending legislation in the United Kingdom that would permit outside non-lawyer investment in law firms. Such ownership is forbidden by ethics rules in the United States, but the participants discuss whether the rules would permit a law firm to sell derivative securities reflecting the value of the firm. The discussion quickly expands into an analysis of the possible impact of publicly-traded law firms on the global market in legal services, the obligations of lawyers to their clients, the role of lawyers in sustaining a well-functioning legal system, and the self-understanding of lawyers as professionals. With significant change in law firm financing just over the horizon, the aim of the paper is to prompt a wide-ranging discussion about the future of the legal profession in a global economy.

non-lawyer, law firms

Abstract:
Virtually all courts that have considered the issue have held that law firms cannot enforce agreements that impose reasonable financial penalties on lawyers who leave the firm and take clients with them. This is the case despite the fact that practice organizations in all other professions, such as medicine, accounting, and engineering, are able to enforce such provisions. The Article uses this resistance as the vehicle for exploring broader issues relating to concerns about the loss of professionalism in modern law practice. The first is the common tendency to dichotomize between law practice as a business and as a profession. This distinction ignores the complex ways in which these two dimensions of practice are intertwined. In particular, the use of business measures that make a law firm more efficient may create a competitive advantage that affords an opportunity for the firm to further non-economic values. The second issue is the failure to appreciate that the concept of professionalism involves multiple values: (1) devotion to the client's interest (2) the control over work exercised by the practitioner of a craft and (3) the exercise of independent judgment as a steward of the legal system. These values have the potential to be either conflicting or complementary. An assessment of developments in law practice thus must examine the extent to which the realization of specific values in particular settings may be furthered or hindered by such developments. A final point is the potential importance of law firms in providing an opportunity for lawyers to reconcile these values in daily practice.

The Article argues that enforcing reasonable penalties can provide law firms with the economic stability that enables them to sustain a distinct institutional culture that is not wholly market-driven. This perspective underscores that allegiance to professional values is not simply a matter of individual character, but is dependent in important ways on larger organizational structures of law practice. In short, realizing the values of professionalism may be more of a collective, rather than individual, achievement in the dynamic and tumultuous world of contemporary practice.

Abstract:
Virtually all courts that have considered the issue have held that law firms cannot enforce agreements that impose reasonable financial penalties on lawyers who leave the firm and take clients with them. This is the case despite the fact that practice organizations in all other professions, such as medicine, accounting, and engineering, are able to enforce such provisions. The Article uses this resistance as the vehicle for exploring broader issues relating to concerns about the loss of professionalism in modern law practice. The first is the common tendency to dichotomize between law practice as a business and as a profession. This distinction ignores the complex ways in which these two dimensions of practice are intertwined. In particular, the use of business measures that make a law firm more efficient may create a competitive advantage that affords an opportunity for the firm to further non-economic values. The second issue is the failure to appreciate that the concept of professionalism involves multiple values: (1) devotion to the client's interest (2) the control over work exercised by the practitioner of a craft and (3) the exercise of independent judgment as a steward of the legal system. These values have the potential to be either conflicting or complementary. An assessment of developments in law practice thus must examine the extent to which the realization of specific values in particular settings may be furthered or hindered by such developments. A final point is the potential importance of law firms in providing an opportunity for lawyers to reconcile these values in daily practice.

The Article argues that enforcing reasonable penalties can provide law firms with the economic stability that enables them to sustain a distinct institutional culture that is not wholly market-driven. This perspective underscores that allegiance to professional values is not simply a matter of individual character, but is dependent in important ways on larger organizational structures of law practice. In short, realizing the values of professionalism may be more of a collective, rather than individual, achievement in the dynamic and tumultuous world of contemporary practice.

Abstract:
Many efforts to understand and respond to a succession of corporate scandals over the last few years have underscored the importance of organizational culture in shaping the behavior of individuals. This focus reflects appreciation that even if an organization has adopted elaborate rules and policies designed to ensure legal compliance and ethical behavior, those pronouncements will be ineffective if other norms and incentives promote contrary conduct.

Responding to the call for creating and sustaining an ethical culture in organizations requires appreciating the subtle ways in which various characteristics of an organization may work in tandem or at cross-purposes in shaping behavior. The idea is to identify the influences likely to be most important, analyze how people are apt to respond to them, and revise them if necessary so that they create the right kinds of incentives when individuals are deciding how to act.

This can be a tall order even if we assume that most behavior is the result of a deliberative process that weighs multiple risks and rewards. It's even more daunting if we accept the notion that conscious deliberation typically plays but a minor role in shaping behavior. A focus on what two scholars describe as "the unbearable automaticity of being" posits that most of a person's everyday life is determined not by conscious intentions and deliberate choices but by mental processes outside of conscious awareness.

In this article, I discuss a particular strand of research that is rooted in the study of non-conscious mental processes, and consider its implications for ethics and culture in the organizational setting. This is work on the process that we use to identify and respond to situations that raise what we think of as distinctly moral questions. A growing body of research suggests that a large portion of this process involves automatic non-conscious cognitive and emotional reactions rather than conscious deliberation. One way to think of these reactions is that they reflect reliance on moral intuitions. When such intuitions arise, we don't engage in moral reasoning in order to arrive at a conclusion. Instead, we do so in order to justify a conclusion that we've already reached. In other words, moral conclusions precede, rather than follow, moral reasoning.

If this research accurately captures much of our moral experience, what does it suggest about what's necessary to foster an ethical organizational culture? At first blush, the implications seem unsettling. The non-conscious realm is commonly associated with irrational and arbitrary impulses, and morality often is characterized as the hard-won achievement of reason over these unruly forces. If most of our moral judgments are the product of non-conscious processes, how can we hope to understand, much less influence, our moral responses? Are moral reactions fundamentally inscrutable and beyond appeals to reason? If reason has no persuasive force, does appreciation of the non-conscious source of our moral judgments suggest that any effort to promote ethical conduct must rest on a crude behaviorism that manipulates penalties and rewards?

I believe that acknowledging the prominent role of non-conscious processes in shaping moral responses need not inevitably lead either to fatalism or Skinnerian behaviorism. Research has begun to shed light on how these processes operate. Related work has suggested how our moral responses may be rooted in human evolution. This perspective focuses on the ways in which our capacity for moral judgment is embedded in physical and mental processes that have provided an adaptive advantage in human evolution. These bodies of research contribute to a richer portrait of human cognition and behavior that can be valuable in thinking about how to promote ethical awareness and conduct.

As Owen Flanagan has put it, "seeing clearly the kinds of persons we are is a necessary condition for any productive ethical reflection." If there were such a thing as a normative theory of human movement, it would be futile if it exhorted us to fly. Efforts to create an organizational culture that encouraged people to fly would be doomed as well. In thinking about ethics, we need to have a sense of what lies between simply accommodating what we tend to do and demanding that we fly. My hope is that this article takes a small step in that direction.

organizations, ethics, legal profession, corporations

Abstract:
This article is part of an exchange including Anthony Alfieri and William Simon in the Georgetown Law Journal on the implications of law firms' increasing reliance on the concept of risk management as the focus of efforts to ensure ethical conduct by lawyers. A risk management program involves the adoption of various policies and procedures designed to minimize conduct that may lead to individual and firm liability. Conflicts checking procedures, standard terms in engagement letters, and the requirement of a second signature by a disinterested partner on legal opinions are but a few of such measures.

On one hand, the risk management paradigm reflects appreciation of the importance of situational incentives and pressures in shaping behavior in organizational settings. This is an advance over conceptions of legal ethics that assume that behavior is principally a function of individual character. Law firms are now major business enterprises, and their systems of rewards and sanctions, as well as their cultures, necessarily influence the conduct of those who work in them. Attending to the ways in which these influences can reinforce or discourage certain types of behavior can help firms establish and maintain environments that enhance the likelihood that lawyers will act ethically.

On the other hand, a risk management approach risks inculcating an instrumental view of legal and ethical provisions. To the extent that it conceptualizes ethics as a matter of avoiding liability, risk management may foster the attitude of Holmes's bad man, who cares only for the material consequences which . . . knowledge [of the law] enables him to predict. The bad man wants to avoid punishment, but has no commitment to legal compliance as a good in itself. This can lead to an impoverished view of law and ethics, in which the choice of behavior is contingent on the costs and benefits of a given course of action.

This tension in the risk management model has been examined in the context of corporate legal compliance programs, and law firms may draw useful lessons from that research. Social psychologists and management theorists have identified complex connections among program characteristics, group dynamics, individual perceptions and motives, and employee behavior in the business setting. In particular, they have suggested that instrumental and values-based programs proceed on different premises and contribute to compliance in different ways. Instrumental programs can be effective by affecting employee cost-benefit calculations, while values-based programs can foster appropriate behavior because the employee identifies with the values that this behavior expresses. Scholars suggest that compliance programs with both dimensions generally are necessary, but integrating them into a single program requires careful consideration of how they may interact. The article closes by suggesting that this research on corporate programs may offer useful insights for law firms. It cautions, however, that applying this research will need to take account of the ways in which law firms both resemble and are different from typical business corporations.

risk management, ethics, Firm Objectives, Organization, and Behavior

Abstract:
Increase in and greater acceptance of cohabitation without marriage raise the question whether law should provide comparable benefits to married and unmarried partners. Proponents of such a development argue that a preference for marriage is compatible with contemporary emphasis on individual choice in intimate matters. On this view, law should focus on the substance of a couple's relationship rather than privilege those partnerships characterized by a formal legal tie. Opponents argue that marriage should continue to have privileged status in the law, because blurring the line between married and unmarried partners would undermine marriage as an important social institution. The result, the argument goes, would be less cultural reinforcement of the value of durable commitment in intimate relationships.

This article suggests that neither categorical extension nor denial of marriage-like benefits to cohabiting partners is appropriate. With respect to certain issues, the state's interest in creating incentives or expressing values that favor marriage should permit the law to restrict benefits to spouses. In other cases, these purposes may be outweighed by more important considerations. This means that making decisions about the respects in which unmarried partners should enjoy legal treatment similar to that afforded spouses requires sensitivity to the interests at stake in each instance. This article examines a variety of benefits, and suggests some general rules of thumb about when the legal claims of cohabitors should be honored as if made by spouses.

Abstract:
From one perspective, not much has changed over the last generation or so in the law governing the formation of family relationships through marriage. Over the same period, however, the rate of marriage has declined, the divorce rate has sharply increased, and there has been a significant rise in out-of-wedlock births. Legal provisions dealing with matters such as divorce, tort and criminal liability, constitutional rights, illegitimacy, nonmarital cohabitation, and employment discrimination all have changed significantly over the past four decades. These changes have bestowed new rights and imposed new obligations on spouses. Furthermore, even those legal rules that have remained relatively constant over this period may now require a subtly different vocabulary for their justification. This broader perspective reveals both continuing tensions in our conception of marriage and a shift in how we tend to accommodate them.