Alistair MacDonald QC is chairman of the General Bar Council of England & Wales
In one week’s time, from February 23-25, the world’s legal and business leaders will descend on London, UK, for the first ever Global Law Summit. Despite its name, the summit is less a pure legal event than an opportunity to bring the business and the legal world together. Never has there been a more relevant time for this to happen. The Summit programme reflects this need. Topics of discussion include business and human rights, activist investors, and business and the rule of law, all pointing to the growing importance of law in business. The symbiotic relationship between law and business is at the heart of the Summit and features as a unifying element throughout.
Of course, it is necessary to say how important a stable, efficient and incorruptible legal system is to the prosperity of the business and financial sectors even in normal times. However well-ordered commercial relations are, it is inevitable that disputes will arise. And this is particularly so in an increasingly complex market involving derivatives, swaps and complex, trans-national energy deals. The need for legal advice and representation spreads to all parts of the intellectual firmament. As biological and other scientific advances occur, difficult questions are raised as to the validity of patents in ways quite outside the imagination of lawyers from earlier, and even recent, generations. And so it is that high quality legal services provide the oil, which lubricates the engine of prosperity and progress.
But these are far from ordinary times. Although it feels like an age since the global financial crisis struck every part of the world, its effects are still resonating. Individuals and businesses were subjected to hefty fines in the courts and there were longer term consequences too. The de-stablising effects of the crisis caused governments around the world to review and reform the regulatory regimes affecting financial services and banking. And these consequences and the new order in this sector have been so important that there has never been a greater need for top class legal services to help steer and guide business through the shoals and currents of the twin challenges of penalties and reform. All of this points to a greater need for the world’s lawyers to come together with those in the business community in order to ensure as smooth a transition into the new world as possible. We can be sure that this synergy is not something that will be needed only for a transient period. It will be necessary to take advice on a regular basis as new areas of potential liability, for example under the Bribery Act, begin to bite on hitherto normal business practices.
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The importance of human rights and due diligence in M&A and other relevant commercial transactions feature much higher on the agenda than they did before. Many companies have moved to non-financial reporting in order to show the impact of their activities on the local environment and community.
Add to the mix the growing complexity of globalisation and the same picture again emerges clearly – law has a bigger role to play in the strategies and running of the world’s banks, businesses and finance sectors.
Many of the Bar Council’s members – high-profile barristers – have transferred their skills from the courtroom to the boardroom: Mark Littman QC, Lord Alexander QC, Dan Brennan QC and Robert Webb QC, to name but four. It may be that the conditions are now right for more leading lawyers to become involved in corporate decision-making, instead of being limited to providing advice and handling disputes.
Many barristers do not practise at the Bar but go straight to the City, business or government service. The skills barristers gain from their training are eminently well suited to the boardroom, especially when avoiding risk is at the top of the agenda for many businesses.
Lawyers have a particular talent for:
- Analyzing the evidence;
- Assembling and developing arguments;
- Identifying the course of action which is best supported by the evidence;
- Influencing outcomes;
- Persuading decision-makers, and
- Acting with integrity.
Today, risk aversion is an asset rather than a burden. The identification of pitfalls by means of taking sound legal advice, well in advance of the need to take decisions and in order precisely to avoid a crisis, will become an essential element of good commercial practice. Prevention is always better than a cure and, in view of the very high stakes now being played for in the world of business, such a course of action will be highly cost-efficient.
And this migration of lawyers into the boardroom is an increasing international trend. In 2014, a study by US academics, Lawyers and Fools: Lawyer-Directors in Public Corporations, found that lawyers have become increasingly prevalent on boards in the US. Some 24 per cent of US companies had lawyer directors in 2000, by 2009 this had risen to 43%. The study also found that having lawyers at the boardroom table had a good effect on corporate performance.
Companies with lawyers on their board were found to have lower litigation risk with, for example, stock option backdating litigation 94 per cent lower at companies with legal directors.
It would be naïve of me, even as Chairman of the Bar, to say that lawyers in such roles can, in all circumstances, guarantee low risk. There are too many external factors at play. However, there is clearly a strong argument for the rule of law and its guardians, that is to say, lawyers, to be involved actively at different points in the development of a business; from strategy formation to compliance and risk management, and on to dispute resolution through mediation, arbitration and the courts.
How businesses and the economy at large navigate through the increasingly complex compliance and risk maze and ensure that the rule of law looms large in the strategic aims of any commercial entity will undoubtedly be a major theme at the Global Law Summit and in boardrooms across the world.