The Risky Situation of In-House Lawyers

Donald Langevoort recently posted his worthwhile paper, “Getting (Too) Comfortable: In-House Lawyers, Enterprise Risk and the Financial Crisis” on SSRN.  Here’s the abstract.

In-house lawyers are under considerable pressure to “get comfortable” with the legality and legitimacy of client goals. This paper explores the psychological forces at work when inside lawyers confront such pressure by reference to the recent financial crisis, looking at problems arising from informational ambiguity, imperceptible change, and motivated inference. It also considers the pathways to power in-house, i.e., what kinds of cognitive styles are best suited to rise in highly competitive organizations such as financial services firms. The paper concludes with a research agenda for better understanding in-house lawyers, including exploration of the extent to which the diffusion of language and norms has reversed direction in recent years: that outside lawyers are taking cognitive and behavioral cues from the insiders, rather than establishing the standards and vocabulary for in-house lawyers.

Download the paper for free here.

Related Situationist posts:

• The Situation of Lawyers’ Complicity,
• Gatekeepers Inside Out – Abstract,
• The Situation of Lawyers and Practicing Law,
• Law, Chicken Sexing, Torture Memo, and Situation Sense,
• “Why Do Lawyers Acquiesce In Their Clients’ Misconduct?, Part I, Part II, Part III, and Part IV,
• The Illusion of Wall Street Reform,
• On the Ethical Obligations of Lawyers: Are We Snakes? Are We Supposed to Be?.”
• The Situation of Legal Ethics
• How Situational Self-Schemas Influence Disposition,
• The Situation of John Yoo and the Torture Memos, and
  
• The Affective Situation of Ethics and Mediation.
  

The Situation of Legal Ethics

Kath Hall recently poster her situationist paper, “Why Good Intentions are Often Not Enough: The Potential for Ethical Blindness in Legal Decision-Making” on SSRN.  Here’s the abstract.

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This chapter takes as its starting point the question of how otherwise experienced and principled lawyers can make blatantly unethical decisions. As recent research has shown, lawyers can become involved in legitimizing inhuman conduct just as they can in perpetuating accounting fraud or hiding client scandal. To an outsider looking at these circumstances, it invariably appears that the lawyers involved consciously acted immorally. Within the common framework of deliberative action, we tend to see unethical behaviour as the result of conscious and controlled mental processes.

Whilst awareness is always part of our actions, this chapter challenges the pervasiveness of assumptions about the power of conscious processes in ethical decision making. Drawing on a range of psychological research, it focuses on two important findings: first, that automatic mental processes are far more dominant in our thinking than most of us are aware; and second, that because we do not generally have introspective access to these processes, we infer from their results what the important factors in our decision making must be. These findings challenge the notion that individuals can be fully aware of what influences them to act ethically or unethically. It also suggests that we need to concentrate upon those conscious processes that we do know influence decision making in deepening our understanding of how to improve ethical awareness.

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To download the paper for free, click here.  To read a sample of related Situationist posts, see “The Situation of Lawyers’ Complicity,” “Gatekeepers Inside Out – Abstract,” “The Situation of Lawyers and Practicing Law,” “Law, Chicken Sexing, Torture Memo, and Situation Sense,” “The Situation of John Yoo and the Torture Memos,” “Why Do Lawyers Acquiesce In Their Clients’ Misconduct?,” Part I, Part II, and Part III, “The Illusion of Wall Street Reform,” “On the Ethical Obligations of Lawyers: Are We Snakes? Are We Supposed to Be?.”

The Situation of Lawyers’ Complicity

Cassandra Burke Robertson recently posted her intriguing article, “Judgment, Identity, and Independence” (Connecticut Law Review, 2009) on SSRN.  Here’s the abstract.

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Whenever a new corporate or governmental scandal erupts, onlookers ask “Where were the lawyers?” Why would attorneys not have advised their clients of the risks posed by conduct that, from an outsider’s perspective, appears indefensible? When numerous red flags have gone unheeded, people often conclude that the lawyers’ failure to sound the alarm must be caused by greed, incompetence, or both. A few scholars have suggested that unconscious cognitive bias may better explain such lapses in judgment, but they have not explained why particular situations are more likely than others to encourage such bias. This article seeks to fill that gap. Drawing on research from behavioral and social psychology, it suggests that lawyers’ apparent lapses in judgment may be caused by cognitive biases arising from partisan kinship between lawyer and client. The article uses identity theory to distinguish particular situations in which attorney judgment is likely to be compromised, and it recommends strategies to enhance attorney independence and minimize judgment errors.

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You can download the article for free here.  For a sample of related Situationist posts, see “Gatekeepers Inside Out – Abstract,” “The Situation of Lawyers and Practicing Law,” “Law, Chicken Sexing, Torture Memo, and Situation Sense,” “The Situation of John Yoo and the Torture Memos,” “Why Do Lawyers Acquiesce In Their Clients’ Misconduct?,” Part I, Part II, and Part III, “The Illusion of Wall Street Reform,” “On the Ethical Obligations of Lawyers: Are We Snakes? Are We Supposed to Be?.”

Gatekeepers Inside Out – Abstract

Situationist contributor Sung Hui Kim’s article, “Gatekeepers Inside Out,” was published in the latest issue of Georgetown Journal of Legal Ethics, Vol. 21, p. 411, 2008. The article is available to download for free on SSRN. Here is the abstract.

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Gatekeepers Inside Out challenges the conventional wisdom that in-house counsel are simply “too captured” by their senior managers in their corporations to serve as effective gatekeepers of our securities markets. The author revises classical gatekeeping theory introduced by Prof. Reinier Kraakman in his seminal article (Gatekeepers: Anatomy of a Third Party Enforcement Strategy, 2 J.L. Econ. & Org. 53 (1986)). In that article, Kraakman clarified that a gatekeeping strategy requires gatekeepers “who can and will prevent misconduct reliably, regardless of the preferences and market alternatives of wrongdoers.” Although Kraakman did not make much of the distinction, he recognized that successful gatekeepers must not only be “willing” but also “able” to prevent misconduct. Now, consider also that gatekeepers must not only be prepared to “interdict” misconduct but also to “monitor” to detect such happenings in the first place. By combining these two simple observations, we see that potential gatekeepers can be evaluated by their: (1) willingness to interdict, (2) willingness to monitor, (3) capacity to monitor, and (4) capacity to interdict. Using this new framework of analysis, the author compares inside and outside counsel for the gatekeeping role. Along the way, the author departs from traditional gatekeeping theory’s exclusive reliance on rational choice theory and imports empirical findings from social psychology and sociology that illuminate the four conditions of effective gatekeeping. By running inside and outside counsel through this rigorous mill of analysis, the author comes to unexpected conclusions. The analytical framework set forth by the author can also be used to evaluate the effectiveness of other traditional gatekeepers, including investment bankers, securities analysts, accountants, and, yes, even credit agencies.

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Here is a quotation from the article:

[T]o understand the willingness of gatekeepers to interdict misbehavior, it may not be most illuminating to consider costs and benefits consciously calculated based on the model of the rational actor. Indeed, the efficacy of sanctions in constraining behavior may be seriously eroded by various psychological factors. Instead, as social psychology teaches us, we may be inclined toward certain behaviors through cognitive processes guided by the the situation and the roles we inhabit in those situations.

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To link to the entire article, click here. To access a related article by Professor Kim, see “The Banality of Fraud: Re-Situating the Inside Counsel as Gatekeeper.” For related Situationist posts by Professor Kim, see “Why Do Lawyers Acquiesce In Their Clients’ Misconduct?” — Part I, Part II, and Part III.

Gatekeepers Inside Out – Abstract

Situationist contributor Sung Hui Kim recently posted her forthcoming article, “Gatekeepers Inside Out” (forthcoming in the Georgetown Journal of Legal Ethics), on SSRN. Here’s the abstract.

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Gatekeepers Inside Out challenges the conventional wisdom that in-house counsel are simply “too captured” by their senior managers in their corporations to serve as effective gatekeepers of our securities markets. The author revises classical gatekeeping theory introduced by Prof. Reinier Kraakman in his seminal article (Gatekeepers: Anatomy of a Third Party Enforcement Strategy, 2 J.L. Econ. & Org. 53 (1986)). In that article, Kraakman clarified that a gatekeeping strategy requires gatekeepers “who can and will prevent misconduct reliably, regardless of the preferences and market alternatives of wrongdoers.” Although Kraakman did not make much of the distinction, he recognized that successful gatekeepers must not only be “willing” but also “able” to prevent misconduct. Now, consider also that gatekeepers must not only be prepared to “interdict” misconduct but also to “monitor” to detect such happenings in the first place. By combining these two simple observations, we see that potential gatekeepers can be evaluated by their: (1) willingness to interdict, (2) willingness to monitor, (3) capacity to monitor, and (4) capacity to interdict. Using this new framework of analysis, the author compares inside and outside counsel for the gatekeeping role. Along the way, the author departs from traditional gatekeeping theory’s exclusive reliance on rational choice theory and imports empirical findings from social psychology and sociology that illuminate the four conditions of effective gatekeeping. By running inside and outside counsel through this rigorous mill of analysis, the author comes to unexpected conclusions. The analytical framework set forth by the author can also be used to evaluate the effectiveness of other traditional gatekeepers, including investment bankers, securities analysts, accountants, and, yes, even credit agencies.

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To read related Situationist posts by Professor Kim, see “Why Do Lawyers Acquiesce In Their Clients’ Misconduct?,” Part I, Part II, and Part III.