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Trying hard to be objective about attacks on the objectivity of inside lawyers

A recent post quoted someone on the view that in-house lawyers have less objectivity than external lawyers (See my post of Jan. 13, 2011: less independence inside.). This “less-objective” rationale parallels the deplorable reasoning of the European court in the Akzo Nobel decision that rejected in-house attorney client privilege. It irritates me to hear the charge. Not that either side is free of blemishes, but each of them in their own ways is behold.

Also, it strikes me as ironic that some senior executives avoid inside counsel – despite their alleged fealty and malleability – and prefer outside counsel – ostensibly with stiffer spines. Why don’t they favor the pushovers?

A metaposts collected posts over the past years that addressed the putative gap in objectivity (See my post of Jan. 22, 2009: objectivity of in-house attorneys with 11 references.). Since the first metapost, however, more comments have appeared on the same subject (See my post of June 10, 2009: similar reasoning regarding consultants; June 16, 2009: dual role as GC and head of business unit; Aug. 20, 2009: limitations on access by in-house counsel to documents disclosed during discovery; Oct. 27, 2009: we can’t be objective about how we made management decisions; Dec. 21, 2009: contrarian argument; March 9, 2010: government perceives outside counsel to have more independence; July 22, 2010: independence of chief compliance officers; Nov. 2, 2010: $50 million from Shell yet independent firms; and Nov. 27, 2010: bonuses from business units to specific lawyers.).

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One response to “Trying hard to be objective about attacks on the objectivity of inside lawyers”

  1. It’s an interesting issue to think about, and really cries out for some form of measurement, though that would be quite the challenging experimental study to conduct! In-house counsel do face perverse incentives to compromise the quality of their advice. In many companies, political relationships are the most important currency, and objecting to poor negotiating positions and project management in the context of dealmaking and compliance initiatives can be quite costly for an in-house lawyer’s reputation, bonus, and future prospects of promotion. Many in-house counsel could dramatically lower the quality of their work without noticing any change whatsoever in their evaluations, as long as they maintain strong internal relationships with senior executives. However, leadership starts at the top, and general counsels who value excellent work on the part of their attorneys can change this perverse incentive by emphasizing (and measuring) high quality work. Additionally, if, in a particular company, the legal department has a solid, stable budget and is well protected from having its advice vetoed, then the incentive reverses, and in-house counsel can focus on providing high quality advice, often times better than that offered by outside counsel.
    In fact, outside counsel often face their own perverse incentives. For example, it is extremely rare for a law firm to not provide a client with an opinion letter the client desires, and law firms often deliberately underestimate the cost of their work and the time frame within which it will be completed, in order to win business. As a result, depending on the incentives at hand, the answer to who is more objective can quite easily shift for any given in-house lawyer or outside counsel attorney.