It is heartening to learn that Mr Townsend, chief executive of the Solicitors Regulation Authority, urges the promotion of morality and ethics on the part of solicitors, intends to look at governance and conflicts of interest, and says that ownership and the independence of solicitors must not get muddled up.
If the SRA is serious about these matters, it must recognise the difference between corporations (with outside shareholders) and individuals (including partnerships and owner-managed companies). Individuals can make moral and ethical decisions, even if the bad apples in the barrel do not do so. The directors and senior employees of corporations are in breach of their company law duties if they make moral and ethical decisions, unless those decisions also happen to be in the best (that is, best financial) interests of the company and its shareholders.
The inherent conflict of interest between owners and professional ethics tilts the playing field in favour of corporations and their shareholders, and against individuals wishing to uphold moral and ethical standards. The playing field can be levelled very simply. The SRA should require every limited company, which carries on the practice of a solicitor in corporate form, to have as its sole object the observance of the core duties in the Solicitors Code of Conduct.
The significance of this is that, under section 172(2) of the Companies Act 2006, that object is substituted for the directors’ common law duty (codified in section 172(1)) to promote the interests of the company.
This requirement will remove the present conflict of interest in support of the approach being urged by Mr Townsend.
Roderick Ramage, Stafford