Thursday Thinkpiece: Regan on Establishing an “Ethical Infrastructure” in Law Firms

Each Thursday we present a significant excerpt, usually from a recently published book or journal article. In every case the proper permissions have been obtained. If you are a publisher who would like to participate in this feature, please let us know via the site’s contact form.

Nested Ethics: A Tale of Two Cultures

Milton C. Regan, Jr.
Hofstra Law Review, Vol. 42, pp. 143-174, 2013

(Excerpt: pp. 143 – 148)

I. INTRODUCTION

As law firms have become larger and more complex,[1] many of them have adopted more sophisticated programs to ensure that lawyers in the firm comply with their professional responsibilities.[2] These programs attempt to achieve more consistent behavior across the firm by relying on specifically designated ethics experts who take the lead in establishing standard procedures that coordinate and reduce reliance on individual discretion.[3] Aside from producing greater uniformity, such procedures also lessen reliance on the probity of individual lawyers. This reflects awareness of the powerful way that circumstances can shape behavior, particularly in large organizations. We can think of these procedures and policies as constituting the basic elements of a law firm’s ethical infrastructure. This term sometimes is used to encompass a broader set of initiatives, but for analytical purposes, I want to use it in the narrower sense.

In recent years, organizations have come to appreciate that procedures and policies designed to promote ethical behavior may have limited effect if employees do not internalize the values that underlie them.4 Scholars suggest that organizations need to combine a focus on deterrence with an approach that emphasizes management’s
commitment to ethical values.[5] As Lynn Sharp Paine describes, these values “reflect important organizational obligations and widely shared aspirations that appeal to the organization’s members.”[6] This approach assumes that employees desire to act on the basis of these values and that they will be motivated to do so if they believe that the organization takes them seriously. Management therefore must ensure that rules that prescribe behavior are not mere formalities because people in positions of authority disregard and show little respect for them. Attention to this dimension of organizational life reflects an effort to promote an ethical culture that complements and reinforces a firm’s ethical infrastructure. While ethical culture is sometimes described more broadly than a focus on the values embodied in an organization’s ethical program, for
analytical purposes, I want to use this term in the narrower sense.

Based on this account of the evolution of law firm ethics programs, we can conceptualize the components that influence ethical behavior as nested inside one another. The first level is the individual who engages in decision-making, who may receive advice from colleagues who act informally to provide ethical guidance. The second level, which provides the larger context for the first, is a firm’s ethical infrastructure, which attempts in various ways to shape and channel that behavior. The third level, which provides the larger context for the first two, is a firm’s ethical culture. This can prompt an individual to embrace ethical values to which a firm is committed, which provides intrinsic motivation to comply with the procedures and policies that make up the firm’s infrastructure. These relationships can be depicted in this way:

The ethical culture in a law firm thus provides the larger context in which individual action and the firm’s ethical infrastructure operate. Ideally, it communicates that a firm is committed to practicing law consistently with the values reflected in the professional responsibilities of lawyers. While this can be crucial in strengthening ethical behavior, there still may be limits to its effectiveness.

First, members of an organization are more likely to be receptive to its ethical culture as they identify more with the organization.[7] An expanded sense of identity more closely aligns individuals’ self-interest with that of the organization, so that they see their own success as tied to the success of the larger entity. Prompting this identification, however, can be a challenge for a contemporary law firm. Most firms are extraordinarily fragile, vulnerable to the departure of their most profitable partners in the lateral market.[8] This fragility may make partners feel that it is hazardous to act as if their long-term self-interest is tied to that of the firm. In addition, competitive pressures now prompt many firms to terminate lawyers who are not performing at a level that the firm deems adequate.[9] This heightened vulnerability also can prevent the formation of any deep sense of attachment to a firm. A second potential limit to the effectiveness of efforts to promote an ethical culture is that when individuals in an organization think of ethics, what tends to come to mind is behavior broader than the type that is the focus of an ethics program.[10] For members of an organization, ethics relates most prominently to how fairly the organization treats the people who work there.[11] Research indicates that there is a strong connection between this assessment and ethical attitudes and behavior.[12] The greater the perception of fairness, the more credible an organization’s professed commitment will be to ethical values and the more successful it will be in prompting its members to identify with it.[13] This directs attention to policies and practices that we may not even think of as relating to ethics. They include matters such as promotion, compensation, and whether people who are generous or selfish tend to get ahead in the organization.[14] These issues relate to the broader culture of an organization, which in turn affects the ability to promote an ethical culture. We therefore can conceptualize organizational culture as an additional component to our model within which the others are nested:

These components are not necessarily sharply distinct. It is possible, for instance, to regard an organization’s ethical infrastructure as including its ethical culture.[15] Professor Christine Parker and her colleagues suggest, however, that in much of the literature on law firms, “[t]he use of the term ‘ethical infrastructure’ . . . has focused on formal policies and structures explicitly designed to ensure compliance with professional conduct rules.”[16] Similarly, it is possible to define ethical culture in a way that includes perceptions of how fairly an organization treats its members.[17] Indeed, one important insight is that an organization generally does not have a discrete ethical culture that is distinct from its overall culture. As Parker and her colleagues emphasize: “All management policies, priorities and initiatives – formal or informal, and explicitly stated or implicitly assumed – can either undermine or support ethical practice within a firm.”[18] There is simply culture: the complex and sometimes contradictory set of messages that an organization sends about what is valued and what is not.

It can be useful, however, to keep the concepts of ethical infrastructure, ethical culture, and organizational culture distinct. Each refers to an analytically distinct aspect of an organization’s effort to promote ethical behavior. As I will discuss in more detail, each directs law firm attention to different types of policies, and each suggests different lines of inquiry for scholars.[19] Research on ethical compliance programs, for instance, has distinguished the effectiveness of programs that emphasize following rules from those that emphasize commitment to values.[20] In addition, differentiating ethical culture from organizational culture underscores that policies, that we normally do not think of as related to “ethics,” may have a significant impact on ethical outcomes. Conceptualizing organizational culture in this way underscores, for instance, that a lawyer’s decision about whether to expose the firm to risk, by deliberately ignoring a potential conflict, may depend on whether the firm offers junior lawyers meaningful
professional training opportunities, and whether it provides income partners with guidance on how to engage in business development.[21] Thus, while ethical and organizational culture may be inseparable, it can be useful to treat them as two distinct cultures within a firm.

The remainder of this Article uses the concept of nested components to chart the evolution of law firm efforts to ensure that lawyers comply with their professional responsibilities.[22] It describes in more detail attempts to accomplish this by developing an ethical infrastructure and promoting an ethical culture.[23] It then discusses research indicating that an organization’s values broadly defined, especially those that its members regard as related to organizational justice, can have a significant impact on ethical attitudes and behavior.[24] The Article concludes by suggesting that focusing on ethical infrastructure, ethical culture, and organizational culture can provide distinctive and complementary approaches to promoting and studying influences on ethical outcomes.[25]

_________________________

1. “Law firms generally can be described as tending toward progressively formal management and internal specialization as firms move from smaller and collegial to larger, more bureaucratic forms.” Elizabeth Chambliss & David B. Wilkins, Promoting Effective Ethical Infrastructure in Large Law Firms: A Call for Research and Reporting, 30 HOFSTRA L. REV. 691, 694 (2002). [hereinafter Chambliss & Wilkins, Promoting Effective Ethical Infrastructure].

2. Id. at 692.

3. Id. at 706-07.

4. Scott Killingsworth, Modeling the Message: Communicating Compliance Through Organizational Values and Culture, 25 GEO. J. LEGAL ETHICS 961, 973 (2012); Lynn Sharp Paine, Managing for Organizational Integrity, HARV. BUS. REV., Mar.–Apr. 1994, at 106, 111.

5. Killingsworth, supra note 4, at 966-68, 974.

6. Paine, supra note 4, at 112.

7. Killingsworth, supra note 4, at 975, 978.

8. See Bernard A. Burk & David McGowan, Big but Brittle: Economic Perspectives on the Future of the Law Firm in the New Economy, 2011 COLUM. BUS. L. REV. 1, 73; see also DAVID JARGIELLO & PHYLLIS GARDNER, FREE AGENT DYSFUNCTION: MANAGEMENT REALPOLITIK FOR U.S. LAW FIRMS 12, 17 (2010).

9. See, e.g., JARGIELLO & GARDNER, supra note 8, at 14-15 & nn.15-17.

10. LINDA KLEBE TREVIÑO & GARY R. WEAVER, MANAGING ETHICS IN BUSINESS ORGANIZATIONS 221 (2003).

11. Killingsworth, supra note 4, at 975.

12. Id. at 978.

13. Id. at 975-78.

14. Christine Parker et al., The Ethical Infrastructure of Legal Practices in Larger Law Firms: Values, Policy and Behaviour, 31 U. N.S.W. L.J. 158, 168-69 (2008).

15. Id. at 160. Christine Parker and her colleagues, for instance, argue for “a broader conception of ethical infrastructure that incorporates informal management policies and work cultures (not just formal management policies), and the promotion of ethical dialogue and values (not just compliance with professional conduct rules).” Id. at 160 n.6.

16. Id.; see also, e.g., Chambliss & Wilkins, Promoting Effective Ethical Infrastructure, supra note 1, at 692 (“[P]rofessional regulation increasingly depends on the development of ‘ethical infrastructure’ within firms; that is, on organizational policies, procedures and incentives for promoting compliance with ethical rules.” (footnote omitted)); Alex B. Long, Focusing Your Firm on Ethics: Responsibility for a Culture of Ethical Practice and Behavior, TENN. B.J., Dec. 2009, at 14, 15 (defining ethical infrastructure as “the organizational structure, practices and procedures a firm employs to promote ethical behavior”); Ted Schneyer, Professional Discipline for Law Firms?, 77 CORNELL L. REV. 1, 10 (1991) (“[A] law firm’s organization, policies, and operating procedures constitute an ‘ethical infrastructure’ that cuts across particular lawyers and tasks.”).

17. See, e.g., Christine Parker & Lyn Aitken, The Queensland “Workplace Culture Check”: Learning from Reflection on Ethics Inside Law Firms, 24 GEO. J. LEGAL ETHICS 399, 401, 441 tbl.A6 (2011) (including in a survey designed to prompt “individual reflection on the ethical cultures” of a firm questions about extent to which some respondents agreed that “I am treated with respect and courtesy in my firm”; “I am treated fairly, in a consistent and predictable fashion”; and “I am able to openly discuss pay and conditions”); Linda Klebe Treviño et al., Managing Ethics and Legal Compliance: What Works and What Hurts, CAL. MGMT. REV., Winter 1999, at 131, 131-32 (describing “fair treatment of employees” as a “dimension of the organization’s ethical culture”).

18. Parker et al., supra note 14, at 161.

19. See infra Part II.

20. See, e.g., TREVIÑO & WEAVER, supra note 10, at 193, 211-12.

21. See id. at 221-22.

22. See infra Part II.

23. See infra Part II.A–C.

24. See infra Part II.D.

25. See infra Part II.E.