2007 Issue 1 - New York City Bar Association

L A W Y E R ’ S R O L E I N C O R P O R A T E G O V E R N A N C E
Task Force has examined only the role of lawyers as corporate advisors and
transactional attorneys. This report does not deal with the quite different
role of lawyers who represent public companies in adversary proceedings. 6
The Task Force has addressed itself generally to the question of how
lawyers, whether in-house or outside counsel, can be more effective in
helping the public companies they advise avoid problematic conduct that,
as Enron, WorldCom and other recent scandals have dramatically emphasized,
can injure many thousands of investors and employees. Lawyers
are often in a position to influence or facilitate the conduct of their
corporate clients. Thus the question of what role lawyers can and should
play to minimize wrongdoing by their public company clients is an important
one. 7
Often this subject, in the literature and public forums, gets reduced
to the single question of whether a lawyer who learns of a client fraud
(past, present or planned) should be obligated to “blow the whistle” to
avert or mitigate the fraud. Under what circumstances, for example, should
lawyers be permitted or required to “report up” wrongful conduct by management
officers to the Board of Directors, or “report out” the conduct to
regulators when the Board fails or refuses to act. Although we do address
this whistle-blowing question below, the subject of the lawyers’ role in
corporate governance is far broader.
The subject is also a complex one, involving three different sources of
rules or guidelines that speak to a lawyer’s role in advising public companies.
The first source flows from legal duty, defined by statutes, regulations
and common law concepts, the breach of which can subject a lawyer
to liability in civil, regulatory or criminal proceedings. This report,
generally, does not speak to questions of liability, 8 except to review the
6. The Task Force has not given specific attention to the possibly different roles played by
lawyers representing auditing firms or underwriters, except in the due diligence context (see pp.
135-42, below). The Task Force also has not focused on the unique regulatory setting of management
investment companies registered under the Investment Company Act of 1940, or the
roles of lawyers advising these companies, their directors or independent directors. Finally, issues
unique to the representation of foreign private issuers are beyond the scope of this report.
7. The extensive academic commentary on this subject has reached no apparent consensus.
For example, compare John C. Coffee, Jr., Gatekeeper Failure and Reform: The Challenge of
Fashioning Relevant Reforms, 84 B.U.L. Rev. 301 (2004) (urging imposition of several clientmonitoring
responsibilities on lawyers), with Jill E. Fisch & Kenneth M. Rosen, Is There a Role
for Lawyers in Preventing, Future Enrons, 48 Vill. L. Rev. 1097 (2003) (arguing against the
utility of imposing such responsibilities on lawyers).
8. For an analysis of the possible theories of lawyer liability in connection with the Enron
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