Ethical issues in corporate law
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Ethical issues in corporate law
Introduction.
Over the past few decades, there has been an increasing interest in making business more ethical. Ethics has become a growing concern in most corporations. In offices and corporations, there is a need to uphold ethics and moral values. Professional ethics are used to ensure that the professional is competent to carry out his/her duties. With the increase in white-collar crimes incorporation, corporations need to embrace ethical codes of conduct. This will require that the professionals be vetted not only on their decisions but also on their practice. It has long been thought that corporate lawyers are unethical and heartless. They are seen as immoral and dishonest, taking advantage of their clients to benefit themselves. This is not an attractive trait, and hence, over recent years, professional ethics has become a vital topic in the legal discourse (Tam, O. K. 2002). In light of these facts, this paper shall seek to assess corporate law’s ethical issues. The paper shall emphasize the benefits of recognizing conflicts of interest.
Assessing the role of legal professionals in corporate law
Before delving into the ethical issues in corporate law, it is first essential to understand the nature and relevance of ethics. Traditionally, lawyers’ role to their clients has been fiduciary (Melvin, A. E. 2006). In most cases, this will require the legal practitioner to act in good faith. Hence, lawyers are expected to act in honesty and portray high levels of openness and integrity when dealing with their clients. Such is necessary for the corporate sector as lawyers are in the usual sense tasked with administering duties that require high levels of honesty (Rose, J. M. 2007).
It is also important to note that the attorney act in the best interest of his client. This will require the lawyer to act in a manner that best suits the client. Where the lawyer handles a case involving his/her client, he/she should handle the matter to the best of his/her ability and ensure the client gets the best possible outcome. The lawyer is hence to act in a manner that in his/her practice is reasonable in the eyes of an ordinary legal professional of his/her qualifications. Acting in good faith also requires the attorney to have a loyal state of mind. He/she bears a duty to his/her client, which is an essential aspect of his/her profession (Nader, R. 1999). Furthermore, acting in good faith and upholding ethics is an essential building block in the lawyer-client relationship.
In some cases, lawyers are given power of attorney, and they act as agents to their clients. In this case, he/she is to act in furtherance of his/her client’s wishes as represented in the agreement. The lawyer should hence not be negligent and reckless in his/her actions and carry out the business and duties assigned to benefit his/her client. In most cases, a corporate lawyer may have powers to administer property and the client’s assets with integrity and transparency. During transactions, he/she should also avoid unethical practices such as bribery and corruption (Aibel, H. J. 1994).
Conflict of Interest
Defining the term conflict of interest is difficult as it depends on each case’s circumstances (Olayemi, O. O., Okonji, P. S., Gbadamosi, T. O., & Oghojafor, B. E. A. 2020). Conflict of interest is where an individual (in our case, a lawyer) has to compete for professional and/or personal obligations, whether private or financial interests, making it difficult for them to perform his/her duties effectively and honestly (Zhao, J. 2012). Conflict of interest also exists if a person must answer to two different individuals or groups whose needs are at odds. Here acting for one group will be to the detriment of the other party. In simpler terms, the attorney is torn between serving their clients’ interests and serving his/her private interests. The attorney is expected to act on his/her client’s interest in all cases where the attorney acts for their client. It can hence be concluded that a conflict of interest goes to the root of the attorney-client relationship. It requires the attorney to be loyal to his/her client and their interests (Weinberger v. UOP, Inc., 1983).
A typical example of a conflict of interest arises where the lawyer has a close relationship with the client or the opposing party. This can be where the lawyer is advocating where he is related to by blood or marriage. For instance, where the issues involve his personal affairs. There is a significant risk that the client’s advice and instruction to his client will be substantial with his loyalty and independent professional judgment. In such cases, the lawyer is inclined to serve his own family or blood relations.
In corporate law, the lawyer may encounter instances where he/she either has a private financial interest in the client’s issue. Furthermore, it is believed that the lawyer will seek out his interests and negate those of the client. He/she would hence act unfairly and selfishly (Hazard Jr, G. C. 1997). This would act in contrast to the spirit of the attorney client relationship. It is important to note that the clients who are being represented are likely to feel betrayed. This has severe ramifications to the client-lawyer relationship. This conflict hampers the lawyer’s ability to represent the client in a significant matter.
Besides, it is reasonable to believe that the client will fear that his case will be mismanaged and his assets carelessly disposed of. In truth, his/her interests may be pushed aside so that the lawyer caters to his/her interest or the other client. For instance, in the case of simultaneous representation, the lawyer must cross-examine a witness whose testimony may be detrimental to the case of his other client whom he is representing (Melvin A. E. 2006).
It is also essential to understand that a conflict of interest may occur where there is a substantial assumption that the lawyer’s ability to study, advise or provide a suitable course of action for the client is essentially limited. This is because his/her judgment will be clouded and influenced by his/her other duties and cases (Evans, A., & Howe, J. 2007). A lawyer cannot, therefore, reasonably handle matters where there are several simultaneous suits. Here he/she cannot reasonably act ethically and may be swayed to one side. Also, where the suit involves two of the lawyer’s clients, his judgment may be split into who to focus on.
Dealing with conflict of interest
The lawyer should do as much as possible to ethically carry out his/her duties and uphold integrity. That being said, conflict of interest is a detrimental ethical issue affecting corporate law and the lawyer’s ability to act transparently. In such cases, the lawyer has three ways of dealing with conflict of interests.
The lawyer must disclose the existence of the conflict of interest. This means that the lawyer should inform the client that a relationship in the conflict could impair his judgment. This means that the client is fully aware of the conflict and can decide whether or not to follow the attorney’s advice. Disclosure creates a background for the case and informs the client of all the biases present. Therefore, to promote transparency, the lawyer must inform his/her client of all the conflicts of interest and any relationships present in the case.
The client can then decide to either choose another lawyer or retain the current counsel of the attorney. This will only be possible where he/she has consented in writing to the attorney’s counsel (Aibel, H. J. 1994). This consent means that he/she is aware of the conflict, but he retains the attorney’s services. The client can also refuse the attorney’s services and not take the risk (Davis, M., & Stark, A. (Eds.). 2001). Also, the client is presented with alternatives to seek out. In the usual sense, a conflict of interest would, in effect, prevent any other alternatives to resolving the client’s dispute. Taking away this conflict would open up other options for resolving the client’s conflict (Loewenstein, G., Sah, S., & Cain, D. M. 2012). In this case, the consent of Informed consent requires that each affected client be aware of the relevant circumstances and the material and reasonably foreseeable ways that the conflict could have adverse effects on that client’s interests.
The lawyer could also recuse himself from the matter. Recusal means that where the lawyer feels his judgment is clouded due to other conflicts, he/she may refuse to handle the matter. He/she hence withdraws from the duties and will not participate in any vital decision-making processes. They may often remain on the board with limited participation, such as only participating in activities in which they do not have a conflict of interest. Where one abstains from the case, he/she is not bound to any liability out of any unethical practices. Recusal is viewed as ethical as it shows both honesty and openness. Although judges mostly practice recusal, lawyers can also practice it to avoid any detriment on any of his/her clients.
The lawyer could also refer the matter to another party. In some cases, lawyers engage in mediation and arbitration (Perkins, R. B. 1963). Where the lawyer is engaged in a matter that he has a conflict of interest or where there is a risk of having his/her judgment is impaired, he may refer the matter to another attorney. This other attorney should not have the same conflict. Referring ensures that there is integrity (Ibid). In most cases, the lawyer refers to an expert or another lawyer who could take over the issue on his behalf so that the relationships or emotions may not influence him/her.
Conclusion
In general, ethics forms an essential part of any profession. The attorney-client relationship in the corporate legal unit should embody loyalty, honesty, and transparency. In some cases, the attorney is placed in charge of the client’s assets, so he/she should place the client’s interests first. His/her interests are and should not, in any case, be permitted to have an adverse effect on the representation of a client. This means that he/she will have to act ethically by separating his/her interests from that of his client. Furthermore, ethics will enable corporate lawyers to carry out their duties honestly, transparent, and open manner, ensuring that the practice of law and its practitioners get the best outcome in case of a dispute.
References
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Weinberger v. UOP, Inc., 457 A.2d 701, 710 (Del. 1983)
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