Milton C. Regan, Jr.
Georgetown University Law Center
Georgetown Law Journal, Vol. 94, p. 1957, 2006
Georgetown Law and Economics Research Paper No. 985078
Georgetown Public Law Research Paper No. 985078
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.
Number of Pages in PDF File: 28
Keywords: risk management, ethics, Firm Objectives, Organization, and Behavior
Date posted: May 8, 2007