The law may traditionally be blind, but today’s firms should carefully consider their ethical stance when choosing which companies to act for.
Much has been made of the role of global enterprise to impact and influence the progress of the world economy. When 1,100 people were killed in Bangladesh in a garment factory collapse in 2013, clothing companies in the West came under huge amounts of political pressure to help raise health and safety standards in the countries responsible for producing their cheap clothing. Similar pressure has been exerted in a range of industries, from fur to fracking, coffee to coal.
Law, too, has its role to play. Allen & Overy – like every other international law firm – transacts hundreds of deals every week in practically every country around the globe, and aims, through its actions, to strengthen countries’ commitments to the rule of law: an admirable project, given that the rule of law should be the foundation of a stable civil society.
Yet global companies, of course, are keen to invest where they can get satisfaction from the courts of the land. But while those courts might be happy to give a judgment against an incompetent contractor or acknowledge IP rights, those very same courts may also be responsible for condemning a woman to death by stoning for adultery.
Beyond nasty regimes, we are all aware of global companies that play fast and loose with environmental impact, health and safety and labour regulations, financial propriety, taxation and basic human rights, arguing – through their lawyers – that local conditions and the exigencies of international competition effectively force them to play by rules in one part of the world that would see them out of business in half a minute in another.
One could argue that in acting for such companies, and testing the boundaries of what is legal regardless of what is ethical simply in order to gain commercial advantage, law firms could be part of the problem, not the solution.
The law is, famously, ‘blind’. The prosecution of criminal laws, however barbaric and inhumane they may be, is not germane to the completion of a water-treatment plant, for instance. The fact that a government imprisons and tortures journalists who dare to write in opposition of it is irrelevant to the completion of a deal to build a new runway at its international airport.
But is ‘the law is blind’ a commercial position that is fit for purpose in the modern world, or will law firms’ vaunted ethical neutrality leave them at a competitive disadvantage in the coming decades?
The corporate world is beginning to realise that existing simply to make money is not enough. Values-based companies outperform the market and competitors by astounding margins, according to various pieces of research, while leading commentators identify purpose-driven identity as being at the cutting edge of transformational management, increasing not only productivity but also employee engagement.
A perfect storm of increasing consumer power and awareness, social media and a different political consciousness in the younger generations has delivered a series of rude shocks to companies around the world deemed to have offended a collective sense of what is right and wrong, from powdered milk manufacturers in China to fried chicken restaurants in the US.
Choosing for whom to act – or not act – is, whether you like it or not, making a decision with ethical implications and, it would seem, increasingly commercial ones too.
But making truly ethical choices is rarely straightforward or easy, as so-called ‘ethical’ investment funds have often found. You may not want to act for a tobacco company or arms manufacturer, but what about their suppliers? How about payday lenders or abortion clinics? How about a fashion designer who uses fur or a private landlord who routinely uses six-month tenancies and rent hikes to maximise yields while causing misery to tenants? Where does ‘ethical’ begin and end?
Making a choice
Internal opposition to ramping up ethical considerations will have plenty of persuasive arguments, ranging from the jurisprudential to the practical – ‘if we don’t do it, somebody else sure as heck will’.
Lawyers, accountants, insurers, private equity funds and consultants all have a huge – often unseen – part to play in the development of world business. They can have a subtle, cumulative influence on how businesses operate, and thus how economies develop.
They can choose how to act. They can choose for whom to act, whom to favour with their counsel, whose star to set on the ascendant.
And yet those choices themselves may come to define the advisers. If there is an ethical aspect to the winners of the future, could a reluctance to look at the issue mean you end up backing the losers?
So what is your stance? Or do you even have one?
Mark Brandon is managing director of Motive Legal Consulting