2007 Issue 1 - New York City Bar Association

More documents

Recommendations

Info

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 state of the law, unsettled in several areas, as a matter of background (see Full Report at pp. 30-50). Ethical rules are the second source, the breach of which can subject a lawyer to disciplinary charges and, possibly, liability claims based on departures from customary professional standards. These rules form the backdrop for recommendations in this report (see pp. 51-56) In addition, we advance some specific recommendations for New York in this area, namely that it embrace a series of 2003 amendments to the Model Rules of Professional Conduct (“Model Rules”) of the American Bar Association (“ABA”) that speak to the lawyer’s responsibilities when confronted with violations of law affecting her client (see Full Report at pp. 72-96). The third source consists of suggestions, neither ethically nor legally mandated, of “best practices,” i.e., recommendations to help lawyers steer their public company clients away from fraudulent or illegal behavior, or conduct that approaches perilously close to the line separating right from wrong. We advance best practice recommendations below for General Counsel and other in-house lawyers, for outside counsel and for law firms as institutions, and also for lawyers dealing with auditors and financial disclosure issues and, finally, for lawyers conducting internal investigations (see Full Report at pp. 96 et seq.). EXECUTIVE SUMMARY OF RECOMMENDATIONS A lawyer’s legal duties: confidential advisor to clients The subject of the lawyers’ role in advising public companies has been an active subject of debate for many decades (see pp. 30-40, below). It has received heightened focus as a result of the spate of recent major corporate scandals, which have again raised the oft-asked question, “where were the lawyers”, i.e., why were such scandals not averted by either inside or outside lawyers The Task Force reviewed the available public record concerning nine recent scandals in an attempt to answer this question on an empirical basis. Our conclusion, necessarily a tentative one absent definitive fact-finding, is that lawyers, either in-house or outside, appear to have been strategically positioned with respect to a significant number of these scandals. Though not necessarily culpable in any actual wrongdoing, a matter for determination by courts or other tribunals, lawyers often were sufficiently familiar with aspects of client conduct later alleged to have been fraudulent to have asked questions about that conduct. They appear to have affair, see Roger C. Cramton, Enron and the Corporate Lawyer: A Primer on Legal and Ethical Issues, 58 Bus. Law. 143 (2002). T H E R E C O R D 168
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 done so in certain instances. Where questions were not asked or pressed, it is reasonable to believe that more assertive action might have avoided or mitigated wrongdoing in some of these situations (see Full Report at pp. 21-30). This conclusion suggests that lawyers are potential “whistleblowers” or “gatekeepers” with respect to incipient or past client wrongdoing, thus posing the question of whether they should be duty-bound to play that role for the protection of the investing public. The Task Force does not recommend that lawyers be required to play such a role (see Full Report at pp. 57-64). To the contrary, we believe that to impose general whistleblowing or gatekeeping duties on lawyers, so contrary to their traditional role as confidential advisors to their clients, would be counterproductive. It probably would result in a chilling of client-lawyer communications, the exclusion of lawyers from some strategic meetings, and generally degrade the ability of lawyers to render well-informed advice to their corporate clients. 9 It might also lead to a defensive advising on the part of lawyers concerned about the possibility of their own liability. The traditional limitation of the lawyer’s duties of loyalty to his or her client, and the correlative obligation to preserve client confidences, is in the public interest as facilitating the rendition of well-informed legal advice to public companies. By rendering well-informed legal advice, even in the face of client or employer pressures to the contrary, lawyers can play their most productive role in avoiding future corporate scandals. The forthright rendition of such advice is every lawyer’s duty. The professional courage necessary to press such advice, sometimes at the risk of losing a client or a job, is indispensable to a lawyer’s ability to play an effective role in corporate governance (see Full Report at pp. 95-96). Thus we do not recommend a fundamental change in a lawyer’s responsibilities, such as by recognizing a general legal (or ethical) duty to the investing public. 10 However, because the lawyer’s public company client has clear legal duties to the investing public, including its shareholders, the effect of corporate action on the investing public must be a matter of active concern for the lawyer in advising the client (see pp. 65-66, below). 9. We recognize that the SEC’s mandatory reporting up rules under SOX, and permissive reporting out rules, which we support, also may produce these impacts to some degree. See Full Report at n. 68 and pp. 70-72, 86-91, below. 10. Of course lawyers, in common with all other participants and advisers involved in the offering of securities by public companies, do have legal duties to the public to the extent prescribed by regulations and statutes, such as the SEC’s Rule 10b-5. For example, a lawyer cannot, any more than a corporate officer, make materially misleading representations to the public in connection with a client’s offering of securities. 2 0 0 7 V O L. 6 2 , N O. 1 169
Page 1 and 2:
THE RECORD OF THE ASSOCIATION OF TH
Page 3 and 4:
Of Note THE NEW YORK CITY BAR PRESE
Page 5 and 6:
O F N O T E cial Department, were p
Page 7 and 8:
R E C E N T C O M M I T T E E R E P
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
P R E V E N T I O N A N D P R O S E
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
P A U L R. M C D A N I E L devoted
Page 73 and 74:
P A U L R. M C D A N I E L The Repo
Page 75 and 76:
P A U L R. M C D A N I E L 2. It wo
Page 77 and 78:
P A U L R. M C D A N I E L Territor
Page 79 and 80:
P A U L R. M C D A N I E L the U.S.
Page 81 and 82:
P A U L R. M C D A N I E L An exemp
Page 83 and 84:
P A U L R. M C D A N I E L Conclusi
Page 85 and 86:
P A U L R. M C D A N I E L do busin
Page 87 and 88:
P A U L R. M C D A N I E L mestic i
Page 89 and 90:
Recommendations on the Selection of
Page 91 and 92:
Recommendations on the Selection of
Page 93 and 94:
J U D I C I A L S E L E C T I O N S
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117 and 118: J U D I C I A L S E L E C T I O N S
Page 119 and 120: W E B S I T E A C C E S S I B I L I
Page 137 and 138: Formal Opinion 2006-3 Outsourcing L
Page 139 and 140: F O R M A L O P I N I O N 2 0 0 6 -
Page 147 and 148: Formal Opinion 2007-1 Applicability
Page 155 and 156: Formal Opinion 2007-2 Secondment of
Page 165 and 166: Report of the Task Force on the Law
Page 167: L A W Y E R ’ S R O L E I N C O R
Page 171 and 172: L A W Y E R ’ S R O L E I N C O R
Page 219 and 220:
L A W Y E R ’ S R O L E I N C O R
Page 221 and 222:
Page 223 and 224:
Page 225:
show all

2007 Issue 1 - New York City Bar Association

Create successful ePaper yourself

Delete template?

Save as template?