What Does a Business Ethics Attorney Do?
A business ethics lawyer is an attorney who specializes in the potential and actual impacts of ethics on an organization’s operations. Business ethics lawyers may support a variety of businesses, charities and other organizations in different industries, but their work primarily centers on helping these entities navigate and best address the challenges they face in relation to the ethics of their business models, hiring practices and more. The overarching goals of business ethics lawyers are to help organizations build ethics-based policies and procedures , anticipate and avoid potential HR-related problems, maintain a culture of ethics within the company and comply with relevant policies and legal requirements. These professionals do so by advising organizations on numerous matters, including: Many issues companies face may be unique to their operations, industry or location. Business ethics lawyers help recognize and address these issues to find the most appropriate and effective solutions for each organization they represent.
Significance of Business Ethics for Corporations
Business ethics, much like business law, are ingrained from the top down. Shareholder and director-approved bylaws, corporate governance manuals, and particularly articulated core values help guide the processes, decisions, and direction of a corporation. Business ethics work in tandem with laws and regulations to better define why a corporation is doing what it’s doing. They also help the public understand the moral parameters within which a corporation will operate.
A corporation that adheres to strict ethical guidelines reduces its risk of litigation, financial liability, and potential reputational damage. With every corporate scandal that the media and the public have latched onto, where do you think those companies’ reputations stand? The more trustworthy a company comes off, the more confidence that the investing public will have in its ability to weather a crisis. Unethical behavior puts that reputation at risk.
Ethics isn’t just about avoiding the bad – it’s also about being perceived as doing good. Corporate officers, directors, and shareholders are responsible for communicating a company’s values to the public. Well-established corporate social responsibility initiatives have the potential to set corporations apart; it can be a unique selling point that connects them with consumers sharing those ethical incentives. Corporate ethics may have hit the headlines in recent years, but they’ve grown from a passing trend to something consumers expect and actively seek out.
How a Business Ethics Attorney Can Help with Compliance
Business ethics lawyers serve a critical role in the broader governance structure of corporations. They advise on contractual issues, internal policies and procedures, and serve as guides in both the mergers and acquisitions process, as well as beginning and emerging businesses. Many business ethics lawyers extend their knowledge into the emerging fourth industrial revolution by advising companies on matters of data and privacy. Business ethics lawyers also support compliance through trainings, investigations, and regulatory counsel. When there has been an alleged violation of the law, or where there are concerns about data, privacy or other regulated areas, business ethics lawyers conduct internal investigations to determine whether a violation occurred, and if so, the proper approach moving forward. The preferred approach as a business ethics lawyer is to engage in preventative measures such as compliance trainings, checklists, and policies and procedures to ensure a company does not find itself in a position of facing allegations of wrongdoing.
Examples of Ethical Issues in Business
Examples from some high-profile cases over the years give insight into the value of having an experienced business ethics lawyer on your side. Several situations highlighted the guiding influence of business ethics lawyers as legal experts, helping corporations steer clear of huge financial and reputation risks. A few examples give an idea of just how critical an ethical business lawyer can be during the lifetime of a corporation.
The Herlitz Case (1997)
Back in the late 1990s, when the importance of corporate governance and business ethics was much less well-understood than it is today, a financial scandal rocked Germany. Herlitz AG sold office supplies to the Ministry of Education in several states, using complicated legal structures to channel funds to favoured companies for their private use. The Ministry issued millions of dollars in contracts, mostly going to suppliers with corrupt ties to public officials, for non-existent or inflated goods and services.
The company paid purchasing managers from the Ministry more than $1.8 million in kickbacks over five years. During that time, five Ministry officials signed false statements confirming that the kickbacks were legal. The scheme favored Herr L, who received kickbacks for signing off on the fraudulent contracts. Several million dollars were used to cover up the crime and conceal the profits. Messger, a business ethics lawyer, assisted the court in gathering evidence of trust violations.
Due to significant loopholes in the law at the time, Herlitz AG’s board members were not held criminally responsible for their participation in the scandal. In civil court, however, a total of $37 million was awarded to the company in damages, and the executives involved were also ordered to pay $4 million in punitive fines. While the case provided some measure of punishment, the system had a serious shortcoming in that it made no distinction between public crimes involving personal gain and other kinds of fraud, like individual tax evasion.
Enron (2000)
In 2000 , Enron Corporation was brought to its knees by financial improprieties involving complex accounting practices that obscured losses and liabilities in its balance sheets. When the problems came to light, the entire company faced bankruptcy, and major Enron executives were indicted for wire fraud, conspiracy, and securities fraud, among other things. Accounting firm Arthur Andersen LLP was found guilty of obstruction of justice after it destroyed thousands of Enron’s documents. Enough evidence was presented in an ethics inquiry to find that the firm "could not become involved in any activity that might jeopardize their impartiality" at the audit level.
In the next year, a grand jury returned an indictment against Kenneth Lay, the former CEO and chairman of the board at Enron, as well as former CEO Jeffrey Skilling and former finance committee chair Andrew Fastow. Shortly afterward, more than 10,000 everyday Americans filed suit, protesting that they had invested trillions in the company and charging that executives had hid the truth about financial problems until late 2001. Lay and others were found guilty of conspiracy and lying to the Securities and Exchange Commission, and then acquitted on fraud charges.
In the end, Lay’s conviction was vacated following his death, but Arnold & Porter later helped recover US$35.8 million from him in a civil money-laundering case. Skilling was convicted and sentenced to 24 years in prison until the sentence was later reduced to 14 years. Fastow pleaded guilty and testified against Skilling. In spite of attempts to get the SEC to place the firm back in business, Arthur Andersen was dissolved in 2002 due in large part to its role in the Enron collapse.
Bearing Witness in Federal Court
Few clients of ours in Canada will need to appeal to a court in the U.S. about an ethics complaint in which they have been found "guilty beyond a reasonable doubt" on every charge, but if you do, you’ll want to call your trusted ethics and professional standards lawyer as soon as possible.
How to Become a Business Ethics Attorney
Becoming a business ethics lawyer requires a solid academic and professional background. A prospective business ethics lawyer should earn a bachelor’s degree – often in business, finance, or accounting – as a foundation that provides familiarity with general business operations. A law degree is essential and many employers favor candidates with graduate degrees in areas such as economics or public policy, as well. Additionally, business ethics lawyers are often successful because they have prior work experience in a related area, such as accounting.
Business ethics lawyers must possess strong research and writing skills to effectively draft corporate governance documents that are reasonable and advantageous for the corporation. Additional areas of expertise include securities law, contracts and commercial law. An ethical mindset and strong judgment are particularly essential for these practitioners as a significant part of their job entails providing counsel on ethical issues and determining when and how best to report any suspected unethical behavior within the corporation.
A reputation for discretion and confidentiality is required when balancing the diverse interests of the corporation and its stakeholders. Attorneys specializing in business ethics should work to develop and maintain strong professional relationships whether with stakeholders or other attorneys.
The Future of Business Ethics Law
Emerging trends in business ethics law are inextricably linked to technology and globalization. For example, the rapid growth of social media is having a profound impact on corporate governance. Companies are now expected to communicate, listen, and engage in a two-way dialogue with their stakeholders regarding a wide range of issues ranging from executive compensation to corporate responsibility.
Many public companies have moved from annual to quarterly or even ongoing engagement with their shareholders, including at least two direct, in-person, meetings per year with the shareholders with whom they have the largest holdings, and with their larger institutional investors. Among other things, these meetings allow the company to better understand investor expectations and to explain how its strategy aligns with shareholder interests, as well as make the case for or against a particular proposal or set of policies, including with regard to board effectiveness and independence, executive compensation, board leadership structure, ESG matters, and risk. Institutional investors are also using social media to solicit votes on contentious proxy contests and has challenged corporate policies and practices through shareholder proposals addressing a variety of topics ranging from board diversity to compensation, and many shareholders are submitting their own shareowner proposals bypassing the SEC process altogether and filing them directly with companies.
Technology is also changing the way boards are educating themselves on risk management and other areas of ethics and compliance, with the availability of online webinars and in-house video conferences on a variety of topics, seminars and symposiums on specific topics hosted by business ethics organizations, and an increasing number of companies developing online courses to be taken by employees and directors on topics such as cybersecurity and human trafficking .
In addition, biotechnology and artificial intelligence are having a profound impact on specific industries and business sectors, with questions regarding the potential risks and benefits of a variety of different uses and applications of the technology. The answer to these questions will continue to evolve over time. Just as advances in solar and nuclear energy, among others, have raised ethical questions about whether and how such technologies should be used, biomedical advances vis-à-vis how genes and genetic information should or should not be manipulated and proprietary rights in and to human tissue, and whether robots and the "internet of things" should or should not be used in certain applications, so too must business ethics lawyers promote and support new approaches to addressing these challenges. In many instances, traditional approaches to ethics, corporate governance and compliance may not be an efficient or effective way of addressing these emerging challenges, which often require collaboration between private sector, public sector, and even non-profit actors to maximize benefits and minimize risks, such as the UN’s Principles of Responsible Investment, the UN Guiding Principles on Business and Human Rights and the World Health Organization’s new Guidance Framework for the Responsible Use of the Life Sciences. Business ethics attorneys and their clients need to anticipate and consider these potential trends and challenges in shaping strategic business and corporate governance decisions, while complying with existing laws and regulations.