GCs, the "3 Moralities and future proofing your legal advice to the business at election time.."

GC's are often called the "conscience of the business" – the person tasked with keeping the company's management focused on being "moral". But what is morality?

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Bruce Macmillan on 19/05/17

Well there are three "Moralities" that we are used to:

"Absolute": the pervading standard of the time against which people and businesses are judged legally and reputationally (and something which is legal but reputationally disastrous could harm the share price and/or sales and so may not be advisable to recommend even though it might currently be technically legal – a classic mistake which is sometimes made by those who are new to in house law);

"Historic": "well, we are not doing it much worse/being much pushier than we were last quarter….so it must be OK" (the root cause of some accounting scandals around revenue recognition and quarterly targets);

"Comparative": "well, we are doing the same as/not much worse than our competitors… so it must be OK" (the root cause of some cartellite behaviours and/or being the one that was worst and therefore got into trouble first);

On a day to day level an important task for the GC and for management generally is to ensure that the standard against which the business measures its conduct is the "Absolute" standard and not the "Historic" or the "Comparative" one – a tough enough task as commercial instincts and pressures are unrelentingly comparative, tactical and short termist; especially in tough times when the tendency is to think "Well we can worry about tomorrow if we get there". 

However, especially at times when a new 5 year plan is being set in electoral manifestos and therefore the future legislative climate is more than usually predictable, it is also important for the GC to lift their gaze, and that of their management too, towards the "Absolute" standard. 

Well, that standard is obvious isn't it? We are where we are! 

Well, not exactly… because what we decide now, will come into force in the future and then persist for a while - your sales strategy ("match our competitors?"), your contractor employment strategy ("GIG?"), your revenue recognition and sales (too early) and procurement contracting (paid too late) approach, your corporate (offshore) and senior executive tax and option planning (LLP?) etc. all take a while to implement and are then intended to run for some years.  They will be assessed, and then they will be judged by the standards applying at that time – reputationally, morally, sometimes legally. 

As we all know; hindsight is often a harsh judge and, whether it is the judge in the court of public opinion or in the actual court, that judge rarely makes allowances for the transient pressures that surrounded the decision making that took place in the past. So when doing our legal analysis and when doing our "horizon scanning" for future legal developments we should also consciously be looking at the mood music and at the political proposals in manifestos as well as at the direction of travel of key court decisions (such as at present on privilege) and of public opinion generally when considering how we advise the business and about the level of legal and wider business risk attached to those recommendations. 

This is particularly true when it comes to advice around business decisions and contracting which are long term, high value, hard and/or expensive to change, difficult to adhere to in day to day business operations (if the relevant business people even know about what they are supposed to be doing in the contract or business model in the first place!), and/or particularly susceptible to "morality slippage" due to business peoples' natural tendency to make assessments using "Historic" or "Comparative" morality. 

Perish the thought that you might have built a critical aspect of your business model's viability on such predictably "shifting sands"  - and yet many businesses do.

Of course it is not normally the GC's job to direct the management's decision making rather than to advise them. But it is the GC's job to ensure that the business' legal risk appetite is correctly calibrated not just at the date of the making of the decision – but also, in so far as is possible, over the anticipated life of the plans, contracts, business decisions etc in relation to which those decisions are being made.

Navigators do not simply plot a plausible route to a ship's desired destination while in harbour. They also take account of knowable weather conditions in making their routing recommendation and then keep actively monitoring the weather and updating route options proactively as the journey progresses – they do not recommend sailing into the worst of a storm if there is a sensible re-route to avoid it. 

GC's, in their role as navigators of the business, have a similar initial and ongoing task in helping the business to plot and to revise its route and, in the election manifesto of the winning party, they will have a 5 year long range forecast to help them to predict the best route through the legal weather that lies ahead. 

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