NYC Bar Issues Report on Attorney Role in Corporate Governance
A recent report by a New York City Bar Association task force on the role of lawyers in corporate governance is a detailed and exhaustive look at the subject. It promises to be seminal. While the report does not recommend a fundamental change in a lawyer’s responsibilities, such as by recognizing a general legal or ethical duty to the investing public, it does posit that the effect of corporate action on the investing public must be a matter of active concern for the lawyer in advising the corporate client.
The task force was chaired by Thomas Moreland, a partner at Kramer Levin Naftalis & Frankel, and included federal district judge Jed Rakoff. In addition, the task force interviewed or consulted an array of heavyweights, including former Delaware Chancellor William Allen, former SEC Corporation Finance Director Alan Beller, former SEC Chairman Richard Breeden, Columbia Professor John Coffee, former SEC Enforcement Director Stephen Cutler, former SEC Commissioner Harvey Goldschmid, former SEC General Counsel Ed Greene, current SEC Enforcement Director Linda Thomsen, and former SEC Chief Accountant Lynn Turner.
The report also declined to impose general whistle-blowing or gatekeeping duties on
lawyers since such would be so contrary to their traditional role as confidential advisors to their clients at to be counterproductive. It probably would result in a chilling of client-lawyer communications, reasoned the tack force, and the exclusion of lawyers from some strategic meetings,
In addition, the report also examined the relationship between company lawyers and the outside auditor and made recommendations to strengthen it. Because most of the recent corporate scandals have involved accounting fraud, the task force recommended that lawyers advising public companies be actively consulted in connection with preparation of their client’s financial disclosures, and that lawyers advising on such disclosures be familiar with the accounting concepts impacting those disclosures. But the task force rejected the creation of a lawyer-auditor privilege.