The SRA’s new principles, introduced last November, open with the statement that they ‘comprise the fundamental tenets of ethical behaviour that we expect all those we regulate to uphold’. The concept of ethical behaviour, of course, runs through all that solicitors and law firms do, and is closely linked to culture.
Establishing and maintaining an ethical culture is the primary way in which a firm can manage risk and compliance, and stay away from the SRA’s attention. However, a good, ethical culture has wider benefits. It is likely to breed behaviours that will make a firm a good place to work, encourage greater staff loyalty, reduce reputational risks and enable higher performance, thereby leading to a more successful business. The balance sheet, ethics and culture – and, indeed, SRA compliance – are all intertwined and pulling in the right direction in well-run law firms.
The Covid pandemic has bought pressure to bear on all these fronts. Regardless of size, specialism or geography, Covid poses a massive challenge to well and not-so-well managed firms. Sudden and dramatic shifts in the levels of client work, and the ability of the workforce to do that work are as close as I would hope any of us will get to a nightmare scenario.
Most firms’ first instinct has been to nurture their staff through the crisis, hoping to preserve the firm’s culture so that when we get to the other side, such support will be repaid through higher work rates and greater loyalty.
But such an approach may be flawed if there is no other side because the firm did not take drastic action to preserve itself. No one knows when this will end, if work as we knew it will bounce back immediately or if it will rebuild slowly – or if clients will be in a position to pay for our services.
For those managing law firms, trying to make decisions based on known unknowns and unknown unknowns, it may well seem that culture and ethics on the one hand, and the balance sheet on the other, are pulling in opposite directions.
Multifarious questions are emerging about pay, reward structures, fit-for-purpose IT systems, office space requirements, supervision of staff, skills and wellbeing, as well as which clients to support and how. These are all difficult management issues that can affect the ethical culture of a firm in the long‑term.
Real, serious dangers arise when financial needs and ethical behaviour are not aligned. Classically, this leads to a higher instance of solicitors using their client account to support their practice. In addition, when finances are stretched, the independence of a solicitor’s advice can also be affected. Will some advise less objectively on a settlement when running a full dispute might mean more fees? A few might be more willing to take on clients that raise money-laundering risks; others may be more susceptible to lending their credibility to a dubious scheme that purports to deliver much needed cash.
As Apocalypse Now’s Lt Colonel Kilgore observed, ‘Some day, this war’s gonna end.’ When it does, it will be those firms that managed to best navigate the financial challenges, and maintain their ethics and culture that will be the ones that are better placed to grow and develop. Equally, the SRA will find it has a new pipeline of cases where solicitors faced with a conflict between their financial challenges and their ethical duty did not do the right thing.
Iain Miller is a partner specialising in legal services regulation at Kingsley Napley LLP