CBA Record March-April 2020
LEGAL ETHICS BY JOHN LEVIN
John Levin’s Ethics columns, which are published in each CBA Record, are now in- dexed and available online.
For more, go to http://johnlevin.info/ legalethics/.
The Lawyer’s Role under the NewCorporate Guidelines
the client from injury. Under the old guidelines, the test was fairly easy – would there be harm to the shareholders? This was basically a financial test – would the action negatively impact share value. The organization could, argu- ably, negatively impact its employees if it was good for the bottom line. Under the new guidelines, a lawyer – at least in theory – would have to take the interests of all the stakeholders - the “cus- tomers, employees, suppliers, communi- ties and shareholders” – into account in deciding what action to take. This is a new issue without precedent, and it raises some interesting questions - for which there are currently no answers. I suspect that some answers will be forthcoming. 1345 Wiley Road, Suite 121 Schaumburg, Illinois 60173 Phone: 847-519-3600/800-844-6778 Fax: 800-946-6990 www.landexresearch.com Landex Research, Inc. PROBATE RESEARCH MISSING/UNKNOWN HEIRS LOCATED NO EXPENSE TO ESTATE Domestic & International Services for: Courts, Lawyers, Trust Officers, Administrators, Executors Looking for a Legal Job? Remember to proofread your resume and upload it toThe Chicago Bar Association so that employers can find and contact you about your next job at www.chicagobar. org (under the Career tab). You can also search through local and national job openings on the site.
I f you are at all involved in the corporate world, you are aware that in August 2019, the Business Roundtable issued a new set of guiding principles for deter- mining the goals of a corporation. The prior guidelines were singularly focused on maximizing shareholder value. Under the new guidelines, companies should address the needs of a wide range of stakeholders – “customers, employees, suppliers, commu- nities and shareholders” - and implement effective environmental, social-impact and governance (ESG) practices. The new guidelines have generated much discussion and a flurry of articles in the legal, financial, and academic press. Many have dealt with the issue of “ESG investing” – how to maximize investment returns when the sole purpose of the corpo- ration is no longer to maximize shareholder value. However, my question is more parochial – do the new guidelines change a lawyer’s obligation to the corporate client? This obligation is governed, in part, by IRPC 1.13, “Organization as Client”, which states, in part: “(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representa- tion that is a violation of a legal obligation to the organization, or a crime, fraud or other violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the John Levin is the retired Assis- tant General Counsel of GATX Corporation and a member of the CBARecord Editorial Board.
organization, then the lawyer shall proceed as is reasonably necessary in the best inter- est of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circum- stances, to the highest authority that can act on behalf of the organization as determined by applicable law. (c) Except as provided in paragraph (d), if (1) despite the lawyer’s efforts in accordance with paragraph (b) the highest authority that can act on behalf of the organization insists upon or fails to address in a timely and appropriate manner an action or a refusal to act, that is clearly a crime or fraud, and (2) the lawyer reasonably believes that the crime or fraud is reasonably certain to result in substantial injury to the organization, then the lawyer may reveal information relating to the representa- tion whether or not Rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.” On one level, the new guidelines do not seem to change the impact of Rule 1.13. The client remains the organization and the lawyer is obligated to act in the best interests of the organization even if it may result in a conflict with an individual officer or employee of the organization. However, the new guidelines have an impact on one phrase of the Rule - “substantial injury to the corporation”. The “substantial injury” is a trigger that allows the lawyer to go up the corporate chain – or even breach con- fidentiality – in the interest of protecting
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