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Ethical organisations 'can avoid problems'

Posted by: Laurence Simons 02/07/13

Compliance is a major part of the general counsel job - ensuring that businesses cope with an often complicated regulatory landscape and avoiding any major failures in this area is crucial, especially in the current climate of media scrutiny and public opprobrium.

Fulfilling this role can be difficult, however, especially within large organisations with many staff and business aims.

While creating a long, elaborate list of graded punishments for anyone who breaks the rules can be good stress relief for in-house lawyers and help pass the time on hot summer days, it is unlikely the chief financial officer will be willing to walk the plank into a bowl of custard, so alternative methods need to be used.

John H Walsh, a partner at Sutherland Asbill & Brennan who served for 22 years at the Securities and Exchange Commission, argued that building up an ethical culture throughout an organisation can prevent major issues from occurring further down the line.

Writing in Law magazine, he argued "companies that build a solid cadre of long-term employees who are committed to the firm, who believe in its mission and business model who work together with high levels of trust and partnership, and who willingly police themselves are formidable competitors".

Furthermore, according to Mr Walsh, investors often see these firms as safer bets because their ethical culture makes them more likely to perform consistently well.

Developing this culture in a business does not mean in-house lawyers need to check if employees are kind to the elderly and tip in restaurants (although you really should tip in restaurants).

What it does mean is establishing levels of 'soft compliance' throughout a company, drawing on social science studies that indicated why certain individuals behave ethically while their counterparts do not.

For instance, this could mean removing certain penalties that have been seen to lead to more violations, concluded Mr Walsh.

Considering that journalists and the general public are particularly aware of corporate ethics at the moment, in-house lawyers certainly need to take the helm to avoid their firms' facing any criticism.