The End of “Non-Accountability”?

In a cultural moment that shows little tolerance for neutral players beholden only to the interests of their clients, law leaders face uncomfortable conflicts and big decisions about what it means to be a moral actor in 2020. Here’s how to face them head-on.

It’s an old American truism that “doing well” is incompatible with “doing good,” but, in 2020, that belief has been overturned by the movement toward greater corporate social responsibility and the expectation, especially from young consumers, that businesses take a moral stand on the most compelling issues of the day, such as racism and climate change.

As consumer-facing businesses grapple with this new expectation, the law firms that serve them now find themselves being held to account for their own corporate citizenship, with pressure coming from in-house counsel to make values-based decisions, such as buying from diverse suppliers or minimizing your carbon footprint. “Doing the right thing” now has new — and acute — business implications.

But are they really new? To some degree, this is simply an extension of the usual client-focused ethos any effective professional services firm embraces. If Pepsi is your client, you’re not serving Diet Cokes in the conference room. And so, whether you, as a firm leader, happen to believe that diverse teams of lawyers provide better legal work (spoiler alert: research shows they do), if your top clients are asking for diverse teams, your staffing model needs to deliver them.

Likewise, if your firm’s business plan depends on bringing in a sizable class of new associates each year, you will be familiar with the expectations of Generation Z law students that the firms they join must share their values. For instance, law student groups have called for firms to do away with binding arbitration and secret settlement policies that once hid sexual harassment claims from view, or for firms to turn away clients whose business harms the environment.

A Simple Cost-Benefit Analysis — Right?

Firm leaders can look at these demands from a purely pragmatic perspective, weighing costs and benefits as one might in any other management decision. For example: Is the opportunity to successfully recruit on campus at Harvard Law worth giving up ExxonMobil as a client?

Some questions you might ask to make this calculation:

• How many first-year associates would you bring in from HLS?
• How much revenue would they create for the firm?
• How much revenue does the firm receive from Exxon?
• If you only recruit from law schools where students aren’t staging climate-change protests, does the total economic value of your associate class go down?
• Would associates from other schools bring in less revenue than those from Harvard?
• Does ignoring the concerns of HLS protestors ultimately hurt your firm’s “brand” with other potential recruits?
• What are the other costs and benefits associated with serving Exxon?
• Has your firm lost or gained opportunities for other business as a result of it?
• Over time, is your firm more likely to bring in additional revenue from a deeper relationship with Exxon?
• Are there more profitable opportunities with other potential clients in the energy sector that you haven’t been able to pursue because of the Exxon relationship?

Though any numeric answers to these questions will be estimates at best, it is possible to quantify the commercial dimensions of a dilemma like this one and come to a perfectly defensible answer. Whenever possible, this is what firm leaders do. Executive decision-making is challenging but at least familiar.

The High Cost of “Staying Out of It”

As far as most lawyers are concerned, “non-accountability” is settled law. Attorneys are not morally accountable for who their clients are, what their clients have done, or even what they themselves will do for their clients, as long as it is within the bounds of the law. While this tradition is rooted in criminal law and naturally carries over into litigation, it prevails in corporate and transactional work too. After all, under U.S. law, the corporation is decidedly amoral, its primary obligation being to maximize shareholder value.

The problem is, non-accountability is increasingly out of step with the broader culture. And the broader culture is your customer’s customer, as well as the source of your firm’s future lawyers.

This summer, many firms posted a “Black Lives Matter” message on their website or social media accounts in the wake of George Floyd’s death and the ensuing protests. Whether they bowed to social pressure or were sincerely moved to act — whether this was a business decision or an expression of ethics — in taking this step, firms waded into significant new territory: they took a moral position.

Publicly pledging support for a movement that explicitly calls out the failures of the American justice system to protect Black people from violence indicates that, at least in some areas, your firm’s values make a distinction between what is legal and what is moral. Many firm leaders are painfully aware of the potential slippery slope this decision sets off, and are struggling, publicly and privately, to navigate these contradictions and questions under increasing internal and external scrutiny.

Cue the Identity Crisis?

Not necessarily. Adding moral considerations to your decision-making process doesn’t have to result in unsolvable philosophical riddles, and you don’t have to go on a spiritual retreat or become a Prius-driving vegan to make space for ethics in your executive leadership.

Making the moral call — and being transparent and consistent about the values driving your business decisions — can be coherent and consistent. And that doesn’t mean your firm will always go with the grain. To give the simplest of examples, there is a clear moral justification for providing representation to a client accused of murder. The key is to be able to articulate the moral value behind that decision — protecting the right to representation is a central aspect of a functioning democracy — and not simply hide behind the shield of non-accountability.

How to Approach a Moral Dilemma

So how do you move moral action from an isolated thought exercise on the firm retreat to the way you regularly do business?

Management guru Peter Drucker laid out six steps to successful executive decision-making in his 1967 Harvard Business Review article “The Effective Decision.” Remarkably, this model has remained relatively unchanged in the decades since and is a staple of business school curricula.

1. Classify the problem. Is it generic? Is it exceptional and unique? Or is it the first manifestation of a new genus for which a rule has yet to be developed?

2. Define the problem. What are we dealing with?

3. Specify the answer to the problem. What are the “boundary conditions”?

4. Decide what is “right,” rather than what is acceptable, in order to meet the boundary conditions. What will fully satisfy the specifications before attention is given to the compromises, adaptations, and concessions needed to make the decision acceptable?

5. Build into the decision the action to carry it out. What does the action commitment have to be? Who has to know about it?

6. Test the validity and effectiveness of the decision against the actual course of events. How is the decision being carried out? Are the assumptions on which it is based appropriate or obsolete?

Drucker glides over any questions of moral complexity in steps 3 and 4, taking what is essentially a “you’ll know it when you see it” approach to ethics. As he put it, “Effective executives know when a decision has to be based on principle and when it should be made pragmatically, on the merits of the case.” It is safe to assume that the executives he had in mind in 1967 were almost entirely Ivy-educated white men with similar enough backgrounds that they all defined their boundary conditions and understood right-ness in basically the same way.

The problem with that in 2020 is that we now understand how implicit and cognitive biases impact our worldview and our decision-making in myriad ways. So, if we are going to add, as a boundary condition to our decision-making process, some kind of moral litmus test, we know that it has to be more sophisticated than just, “Is this right or wrong?” A better question might be “Does this decision do harm?”

Expanding Your Consideration of Stakeholders

Examining harm, of course, leads use to ask, “Harm to whom?”

Decisions impact different stakeholders differently and, as we noted in the example of a firm deciding whether or not to bow to law student pressure to stop representing a big oil company, the choice that is best for the client (presumably: keep representing them) is not necessarily the choice that is best for the young attorneys who don’t want to be complicit in denying climate change or the communities threatened by pollution.

Last year, the Business Roundtable issued a remarkable “statement on the purpose of the corporation,” which committed businesses to operate in service of multiple stakeholders, including customers, employees, suppliers, and communities. Notably, this new standard of corporate responsibility (signed off on by 181 CEOs when it was issued and more since) names company shareholders last — after customers, employees, suppliers, and communities — in the list of commitments.

Was this toothless PR? Maybe. But at the very least it’s clear these CEOs are aware in new ways that the world is watching.

As a law firm leader, you, like any other CEO or business leader, have multiple stakeholders to consider in your decisions:

• Clients (growing firms should count targeted future clients in this group)
• Colleagues (your partners and the other attorneys and managers in your firm, as well as future recruits)
• Constituents (the support staff, contractors and vendors who are part of your team and who depend on you financially)
• Community (the cities where you live and work)

Clear as Mud?

Part of the appeal of non-accountability is its simplicity. With that ironclad justification, law firms can stand outside the messy process of moral decision-making. But, for good or ill, the increased transparency and accountability social technologies have brought to the fore has made continuing to rest on non-accountability untenable. Today’s law leaders face a far more complex decision-making landscape than their predecessors, but they also have true opportunities to do well and do good at once. Whether and how they decide to do so will shape the future of their firms for a long time to come.