The risks of not shooting straight for lawyers

– Gatekeepers – like lawyers – do have a role to play.
– Lawyers should “shoot straight” and provide business advice that “feels right.”

If you ever attended one of the executive pay conferences I hosted over the years, you know that a theme of “doing the right thing” ran threw them. It evolved over the years as practices evolved – but the theme was always there. At least in the background.

One of the highlights that punctuated that theme was a keynote delivered nearly a decade ago by legal giant John Olson, who opened the Gibson Dunn office in Washington DC way back when. John delivered a keynote about “The Risks of Not Shooting Straight,” calling to us as gatekeepers to remember that we do indeed have a role to play. To be a gatekeeper.

As John gets going, he makes the point that we need to bear in mind that the corporation is the result of a social compact between society, as represented by our government, and those who manage and invest in the corporation. Here is an excerpt that drives home that point:

This goes back to the royal compacts and charters that were given to the great companies that opened up exploration around the world from Western Europe, which includes some of the organizations that created the states that we live in. The corporation has always had, and I think we tend to forget this, a public purpose; a bargain has been struck between those of us as citizens and the government that represents us and investors and managers.

And the bargain is: that this corporate vehicle which has been the engine of so much of our economic growth and which has made the American capital system the envy of the world, as we have perfected this instrument I think better than anyone, is this:

We made corporations easier to form, easier to understand, easier to invest in, better regulated, traded on markets that are better regulated and more transparent than anyone else, and that’s all good. But what has happened and I see it still happening despite Dodd Frank, despite the SEC’s new rules, despite our best efforts at disclosure, is that the public is losing confidence in the integrity and the legitimacy of this incredibly creative central instrument of our capital system.

John then made a rallying cry for us as gatekeepers to do the right thing. Here is another excerpt:

So what do we do about it? Well I think you have an opportunity, you as advisors have an opportunity, and that is to help to explain why compensation is what it is, but also and, very importantly, as advisors to those who are in management, are in the boardroom – an opportunity to help them think through how the plans they’re coming up with are going to be understood and received by a critical public.

If we don’t get it right, if we don’t have an environment where our citizenry, not just employees, not just investors, but communities, voters, your relatives and mine, our neighbors, have confidence in America’s companies and those who manage them, if the view of the citizenry is that corporations are being managed primarily for the greed and aggrandizement of the managers, that historic social compact that created this wonderful engine of our economy is going to be broken and we’re going to see something we’ve seen in other countries: Companies that are heavily state run, regulation that is going to stifle innovation, a loss of confidence in our economic system.

Time seems to have worn down the legal profession. Commoditized it. Made us forget our role as gatekeepers. Many lawyers don’t give “business” advice. Many haven’t even been trained how to do that.

It’s been a long time since John delivered that speech – but it’s never too late to do the right thing…