Our corporate soul

‘If your boss demands loyalty, give him integrity. But if he demands integrity, then give him loyalty.’
USAF Colonel John Boyd, quoted in Boyd: The Fighter Pilot Who Changed the Art of War by Robert Coram

‘Our objectives are… to achieve the highest order of excellence in the practice of the art, the science and the profession of the law; through such practice to earn a living and to derive the stimulation and pleasure of worthwhile adventure.’
Judge Simon Rifkind, Paul, Weiss, Rifkind, Wharton & Garrison, 1963

‘[The] firm is not a business… no partnership agreement – only a handshake among friends.’
Martin Lipton, Wachtell, Lipton, Rosen & Katz, 1990

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‘I’m borderline obsessed with this,’ confesses Pinsent Masons senior partner Richard Foley. ‘You will never hear me do a presentation without explaining the values. We are a values-based business. It’s a better business because of that.’

Another senior partner, Linklaters’ Charlie Jacobs, has a reputation, as he puts it, for ‘banging on about the three fucking Cs’ in every speech he makes (standing for clients, culture and confidence). ‘I don’t think the legal industry generally spoke enough or articulated what their culture was,’ says Jacobs of the profession’s willingness to tackle such ‘soft’ issues seriously, just a few years back. ‘Everyone would talk about it and tell you theirs is special. But if you took 30 people and asked them “can you articulate it?” they would struggle.’

Foley and Jacobs may be more forthright than peers, but they are far from alone. Almost all leaders of major City firms have formulating or reviewing the purpose and values of their organisation as a notable point on their to-do list. That interest reflects a wider debate in corporate circles challenging the notion of business as narrowly geared to shareholders’ interests and profit generation. But the legal industry was slower than others to respond. And major law firms have been locked in a global war for talent that has seen the top players in the UK and US struggle to push partner profits ever-upwards to retain star performers.

“Look at the starting associate salary at US firms – the only way we can compete is to offer something beyond money.” Andrew Darwin, DLA Piper

Yet many UK law firm leaders maintain that such priorities are evolving. ‘I cannot remember the last time I did some wide communication that didn’t have something around purpose and values,’ says Eversheds Sutherland co-chief executive Lee Ranson.

True, few topics lend themselves to corporate waffle quite so neatly as the idea of defining institutional values and purpose. But cynicism can also obscure more meaningful shifts in the profession. As such, The In-House Lawyer has taken an extended look at the forces pushing firms to define their values and assessed how substantive results are of this collective examination of their corporate souls.

‘Not fluffy’

Current attempts to define a broader purpose for business stretch way further than evident in the profession’s goldfish bowl. As Pinsents corporate partner Tom Leman puts it: ‘The traditional version of capitalism based on shareholder value is dead. Profit at all cost is not a concept that sits with the business world anymore and we want to be part of that world.’

The dawn of the internet and social media has further stoked such forces, creating additional reputational risk for business, especially consumer-facing industries. ‘Everything is so transparent now and there is so much information available,’ notes CMS Cameron McKenna Nabarro Olswang senior partner Penelope Warne. ‘People voice their views so much more than they used to and that’s had the effect to prioritise these issues of values.’

Such forces primarily impact the legal industry on two fronts. First, clients are scrutinising law firms’ record as corporate citizens more seriously, reflecting their own attempts to launder plc images. Warne speaks for many law firm leaders in noting that questions on values and ethics now crop up regularly from general counsel: ‘Clients are being vocal and putting pressure on law firms. When they have their panel arrangements, the first questions firms tend to be asked are around diversity and inclusion, corporate responsibility and the environment.’ The second impact comes from within. While there is much confusion about what Millennials or younger staff want, it is generally agreed that aspiring lawyers are less willing to tolerate the ethical hardball City law firms took for granted even a decade ago.

The point is particularly pressing for UK firms at a time when US rivals offer far richer remuneration to young talent. Being less ruthlessly bottom-line starts to look more attractive when US rivals do ruthlessly bottom-line so much better. DLA Piper’s senior partner Andrew Darwin notes: ‘Look at the starting associate salary at US firms – the only way we can compete is to offer [our people] something beyond money.’

If you look at law firm websites, their statements of values are often vanilla: permutations of integrity, trust, etc. If I were a client I’d struggle to tell one from the other.
Richard Butler, management consultant

Ashurst chair Ben Tidswell comments: ‘This is not fluffy or altruistic or about paying lip service. It’s about running a successful business. It is absolutely central to delivering services for the client. Firstly, it’s about the nature and quality of what we deliver to the client, and second, this is a people business: good values engage people.’

But while managing partners getting poetic on purpose and culture is nothing new, the tricky next stage for the profession is turning vague, apple-pie virtues into defined messages that can be packaged, branded and pitched to clients and staff in a way that sticks, rather than stays buried on a law firm website.

In most cases that involves firm-wide consultations to identify the values that staff share to be summarised in a handful of words that supposedly define what the firm stands for. ‘It’s about understanding who you are, not about pretending to be someone else,’ says Hogan Lovells UK and Africa managing partner Susan Bright, whose firm reviewed its values five years ago. Hogan Lovells ran an internal survey and a series of round-table discussions where staff were asked to describe ‘what it feels like to work at Hogan Lovells’. As a result, the firm came up with five words setting out what its staff are encouraged to be: ‘ambitious, innovative, supportive, committed and responsible’.

Linklaters’ strategy review in 2017 included a look at values and purpose, an area Jacobs took personal charge of. He took inspiration from one of his long-term clients, South Africa-bred banking group Investec: ‘They use a lot of visual tools reminding people what their values are and describing their origin, always reminding people they have to work together. The attrition rate at that firm is lower than a lot of banks. There is massive loyalty and pride.’ The Magic Circle firm’s values are now condensed around five points: ‘We strive for excellence, to deliver fantastic client service; we respect each other, supporting our people and embracing diversity; we are leaders, empowered, entrepreneurial and encouraged to take initiative, embracing new ideas; we act with integrity, not just doing things right but doing the right thing; we are one team, united, inclusive and collaborative, delivering the whole firm to clients.’ Following Investec’s approach, Jacobs pushed for the five principles to be visible. They now hang on the firm’s office walls and in Silk Street’s main canteen. Screensavers alternate visual reminders of the values and explanations of each of them.

If the general trend is to dust down verbose and forgotten value statements, firms are mercifully being increasingly concise. After Darwin took over as senior partner at DLA in February 2018, the firm created an interactive platform to identify common values, alongside a series of workshops. The values emerging: ‘Be collaborative, be supportive, be bold, be exceptional.’ But Pinsents has managed the most brevity with its ABC values: ‘Approachable, Bold, Connected’.

Allen & Overy (A&O) reviewed its values in 2016, the year in which Andrew Ballheimer and Wim Dejonghe took over as managing and senior partner respectively. The goal was to make them ‘shorter and more reflective of what we wanted to be’, notes HR director Sasha Hardman. They emerged as: ‘Instinctively thoughtful, collectively ambitious, insightfully inventive, refreshingly open.’

“People want you to live by your values. A lot of firms come up with something like Pride Month or Black History Month. They deal with it for a month and it’s gone.” Charlie Jacobs, Linklaters

After Eversheds’ transatlantic merger in 2017, the firm launched its 2020 strategy, which explicitly refers to purpose. ‘One of the first things we did after the merger was taking feedback from across the business – not just UK and US – about the things people thought were important and behaviours they expected,’ recalls Ranson. ‘We asked them to find one word to articulate what was important.’ As a result, Eversheds’ purpose was defined as ‘helping our clients, people and communities to thrive’. Its five core values were boiled down to being: ‘collaborative, creative, inclusive, open and professional’.

But if any firm is seeking to make values and purpose the foundation of its business it is Pinsents, which Foley describes as having moved from ‘a business with a set of values’ to a ‘values-driven business’, noting that there needs to be a ‘clear link between values and strategy’. Foley recounts the increasing exasperation he encounters in conversation with GCs, who see private practice as dysfunctionally fixated on money: ‘If all we’ve got to say when clients ask “what’s your purpose?” is “money”, well, it’s not much of an answer is it.’ In November 2018 Pinsents started this shift to ‘purpose-led organisation’, following a firm-wide consultation to assess ‘our values, who we are and why we exist as an organisation’. Corporate partner Leman is now dedicating half of his working hours to the ongoing process as part of a four-strong team including head of purpose transformation Liam Wardley (Pinsents is the only major law firm with such a role). The duo say no timetable is set for the completion of the project.

Not everyone is enthused with the results of attempts to define purpose. Richard Butler of Sagency, a management consultancy that often advises law firms on branding, notes that such efforts frequently veer towards the bland. ‘If you look at law firm websites, their statements of values are often quite vanilla: permutations of integrity, trust, being collaborative, innovative and creative proliferate. If I were a client I would struggle to tell one from the other.’ Butler adds that his research with dozens of associates at major firms concluded that such messages typically fail to engage staff. ‘None of them are saying: “Those values are why I wake up in the morning.”’

Conversely, he cites the 1963 statement of principle by Simon Rifkind of New York’s Paul, Weiss, Rifkind, Wharton & Garrison as an example of compelling communication. Fellow Wall Street leader Wachtell, Lipton, Rosen & Katz provides a similarly fluent summation of its ethos on its website. Wachtell was already famous on Wall Street for the oft-quoted 1990 memo by Martin Lipton, which combines descriptions of its model with its ethos and values in a direct and engaging style. City firms struggling for the tone and content for such statements could do worse than look to such examples.

It matters or it doesn’t

Of course, identifying values is only the starting point. Such exercises mean little without evidence that aspirations are acted on. The challenge for law firms is that if they keep ‘banging on’ about values, then some sensitive souls may expect them to stick to them.

‘People want to see you live by your values,’ says Jacobs. Foley adds: ‘If the values are separate from the business, that’s where the cynicism comes in. Either it matters or it doesn’t. Values aren’t optional.’ Jacobs concedes the profession has done much to stoke such jaded views: ‘What a lot of law firms do is come up with something [for] a month – this is Pride Month, this is Black History Month… They deal with it for a month and then it’s gone.’

It is conceded that encouraging such high-minded efforts amid the daily grind is a work in progress, but most firms argue they have gone further than just lip service. At Eversheds, behaviour according to firm values is taken into account in the annual bonus review. At A&O ‘there is a lot of talk about whether people live the values when it comes to recruitment, promotion and leadership roles’, says Hardman. DLA’s Darwin says values impact recruitment, promotions and remuneration. Outside the top ten, the leadership of Ashurst and DAC Beachcroft say such considerations impact compensation at their firms.

“Clients, regulators and the community are changing, and we need to be very focused on that.” Matthew Layton, Clifford Chance

A number of firms also set up systems to make it easier for staff to report poor behaviour, especially after the #MeToo movement helped to trigger the disclosure of a lengthy string of misconduct cases in the law (see ‘Top ten firms and alleged misconduct’, below). Firms including Clifford Chance (CC), Linklaters, A&O, Hogan Lovells and Eversheds set up helplines or systems of mentorship, which provide advice on handling concerns of misbehaviour. Last year Linklaters introduced a ‘guidance on how to manage relationships at work’, stating all its staff have to notify the firm of any personal relationships with colleagues that may lead to conflicts of interest.

With many firms including a reference to diversity in value statements, defined targets for gender and diversity representation have crept into City law’s mainstream. Among the UK top ten, Eversheds, Hogan Lovells, Herbert Smith Freehills (HSF) and Norton Rose Fulbright have a target for the proportion of female partners with a timeframe to achieve it (30% by 2021, 30% by 2022, 35% by 2023 and 30% by 2020, respectively), while Linklaters has set – but not always met – the goal of having at least 30% of women in each year’s partner intake. A&O met last year the target of having at least 30% women in leadership positions. With the percentage of female partners among the top ten ranging from A&O’s 18% to CMS’s 32%, much remains to be done. And, as noted in Legal Business’ June cover feature, ‘Ticking boxes’, the performance of major law firms on ethnic diversity makes mixed results on gender look like a triumph in comparison.

But if such facts illustrate the distance law firms have to travel in living up to their rhetoric, perhaps the key test of their commitment to lofty values will be their approach to client acceptance. In short, which kind of lucrative but ethically-stretching clients are law firms prepared to turn away?

Two recent episodes point to some of the reputational issues at play and perhaps offer some sign of the profession shifting. In spring 2018, MPs on Britain’s Foreign Affairs Select Committee called on Linklaters to answer questions on its role advising the underwriting banks on the initial public offering of energy company En+ Group, owned by sanctioned Russian oligarch Oleg Deripaska. After Linklaters declined to appear before the committee, MPs said it was ‘for others to judge’ whether the firm was ‘so entwined in the corruption of the Kremlin and its supporters that they are no longer able to meet the standards expected of a UK-regulated law firm’.

Linklaters publicly rejected ‘any suggestion based solely on the fact that we – like dozens of other international firms – operate in a particular market that our services may somehow involve the firm in corruption’. Nevertheless, partners privately concede the firm has taken more care when accepting mandates in Russia since the enquiry and broadly is more wary of reputational risk when taking on work. Notes one partner: ‘In Russia, we’ve always turned away a lot more work than we’ve taken on, but since the select committee, it’s even more so.’

At the beginning of last year, Labour peer Lord Hain accused Hogan Lovells of being complicit with corruption and money laundering in South Africa, and called on the Solicitors Regulation Authority (SRA) to withdraw its authorisation as a recognised body. The issue related to the firm’s work for the South African Revenue Service. The SRA said it would take no action against the firm and the South African Law Society found no evidence of misconduct. Yet in August 2019, Hogan Lovells announced a restructuring of its South African business, bringing to an end after six years its tie-up with Routledge Modise and relaunching a smaller, 20-lawyer practice under its UK LLP. Firm insiders indicated the move was in part aimed at moving away from South African domestic work, including government-related mandates, amid concerns of reputational risk.

True, most firms are still vague when it comes to making commitments on ruling out acting for certain clients, citing the principle that ‘people are entitled to legal advice’. Cynics would note that the average hourly rate of top-50 UK firms makes clear that major law firms are poorly placed to mount the access-to-justice defence. But that is not to say there has been no movement in the industry’s moral compass. Amid tougher regulation of large law firms in recent years, many concede that once-cavalier attitudes to accepting clients have given way to a somewhat more sceptical and lengthy process. Certainly, client acceptance procedures have grown considerably more rigorous in recent years, in part reflecting anti-money laundering requirements (see ‘Informed decisions rather than judgment calls’, below).

Every client mandate at Linklaters is submitted to an internal online business clearance system managed by its risk team, with the firm saying that reputational and ethical issues ‘form a far greater part of our consideration than any commercial consideration’. In 2017, the firm also published an ethical code, setting out global ethical standards that ‘supplement local regulatory requirements’. These include a commitment to ‘act at all times to uphold the reputation of the firm’, a pledge that continues: ‘Any appearance of impropriety in our conduct, whether in our business or personal capacity, could damage the reputation of the firm.’

DLA has a client committee chaired by Darwin that assesses matters exposing the firm to reputational or ethical risk. Hogan Lovells assesses matters based on ‘suitability for the firm’, which includes looking at whether a client has been in the press or generated controversy; any matter posing issues is referred to the firm’s GC who can then further refer it to chief executive Steve Immelt.

Firms including DLA, Pinsents, CC, Linklaters and Hogan Lovells have signed up to the United Nations’ Global Compact, the framework launched in 2000 stating ten corporate sustainability principles. They include a commitment from signatories to protect internationally proclaimed human rights, the elimination of discrimination in the workplace; and the development of environmentally-friendly technologies.

CC managing partner Matthew Layton says the framework gives the firm ‘principles when we consider individual clients and individual mandates’.

While it is easy to be cynical regarding the willingness of City firms to turn away lucrative business, there has been a considerable shift since the early 2000s when the top firms routinely flouted conflict-of-interest rules until several high-profile cases hit the headlines.

A worthwhile adventure

If it is clear that major law firms are still in the early steps of a journey towards forging and applying institutional values and purpose, it is also apparent on closer inspection that change is genuine, however fumbling early attempts are.

The now-forgotten debate on law as a business versus a profession has taken with it the memory that peer pressure, social bonds and professional ethos had once been relied upon to police the City’s prestigious law firms back when they were far smaller, UK-dominated outfits. The endless line of scandals, regulatory actions and controversies now hitting their globalised, networked, sprawling current incarnations are reminders that London’s legal elite is still trying to find rules and frameworks fit for its current circumstances.

The danger is all the more pressing for law firms given the deference accorded to partners and the owner/manager structure. At their current scale, it is easy for even the most prestigious law firm to go astray. More rigorous processes and rules as well as attempts to inspire more high-minded corporate behaviour are all means of addressing that challenge.

Notes Layton at CC: ‘We have to recognise that we are on a journey in terms of change. There is not a clear single destination so we cannot say “when we achieve this, we’ll be done”. Clients, regulators and the community are changing, and we need to be very focused on that.’

It is also easy to forget that effective regulation of commercial law firms is a recent phenomenon. Ten years ago it barely existed with enforcement near-exclusively geared to high-street firms. Last year’s parliamentary drubbing of the SRA for lack of action on abuse of non-disclosure agreements may in hindsight prove to be a decisive moment for the industry, further accelerating the watchdog’s willingness to police the City elite.

Another aspect to the shift are faltering efforts among global law firms to develop clear brands. Notes Butler: ‘Firms need to behave more like brands and to do that they need to build their brand from their purpose. It would deliver much-needed differentiation.’ Certainly it is increasingly difficult to see how many UK-born law firms can prosper globally without developing more visible and compelling brands to appeal to potential clients and recruits. As easy as it is to ridicule law firms’ efforts to define brand and purpose, industry leaders would surely do well to redirect some of the herdlike efforts to package their latest ‘innovations’ towards thinking about what the point of their firm is. For Ranson, it is simple: ‘Firms that have got clear purpose and values are better firms to work for. In the long term, that’s going to make a difference.’

Marco Cillario and Nathalie Tidman

Value statements – Major UK firms’ core corporate values

DLA Piper
Be Supportive, Be Collaborative, Be Bold, Be Exceptional

Clifford Chance*
Exceeding clients’ expectations; Local excellence, global standards; Ambition for success; Investing in talent; Adaptable and approachable team; Thinking ahead; Strength through diversity; Community

Linklaters
Values: We strive for excellence; We respect each other; We are leaders; We act with integrity; We are one team. Purpose: Delivering legal certainty in a changing world.

Allen & Overy
Instinctively Thoughtful, Collectively Ambitious, Insightfully Inventive, Refreshingly Open

Hogan Lovells
Ambitious, innovative, supportive, committed and responsible

Norton Rose Fulbright
Quality, unity, integrity

Freshfields Bruckhaus Deringer
No statement setting out the firm’s core values

CMS
We grow; We are resilient; We engage; We include; We trust and respect; We collaborate; We innovate

Herbert Smith Freehills
Connect; collaborate; lead; excel

Eversheds Sutherland
Values: Collaborative, Creative, Professional, Inclusive, Open; Purpose: Helping our clients, people and communities to thrive

Pinsent Masons
ABC – Approachable, Bold, Connected

DAC Beachcroft
Supportive; determined; creative; and clear

Simmons & Simmons
Challenge; innovation; responsibility; commitment; ambition; collegiality

Ashurst
We are passionate about quality; we deliver through collaboration; we think differently

Top ten firms and alleged misconduct

    • Allen & Overy has been prominent in the #MeToo saga after it emerged that employment veteran Mark Mansell was responsible for drafting a controversial gagging order for disgraced Hollywood producer Harvey Weinstein signed by Zelda Perkins (pictured) back in 1998. Perkins alleged sexual misconduct by Weinstein against a fellow employee of Miramax with the contract criticised by some as unenforceable and excessive. Mansell is to stand before the Solicitors Disciplinary Tribunal (SDT) in December.
    • Freshfields Bruckhaus Deringer was in the unwanted spotlight for much of October with the SDT hearing of restructuring partner Ryan Beckwith over two alleged incidents in 2016. The SDT ruled on 10 October that Beckwith had breached principles two and six of the solicitors’ code of conduct, requiring solicitors to act with integrity and maintain public trust, due to one incident of sexual activity with an intoxicated junior lawyer in his team.
    • Between February 2018 and April 2019, CMS asked its former Singapore head Andrew Stott and head of intellectual property Joel Barry to leave the partnership over unnamed matters that were reported to the Solicitors Regulation Authority (SRA).
    • Herbert Smith Freehills employment partner Andrew Taggart was reported to the SRA having advised former IFM Investors City analyst Nathalie Abildgaard that her sexual harassment claim would end her career. Abildgaard, who was awarded £270,000 in April after settling the case, alleged ‘aggressive and intimidating behaviour’ in Taggart’s dealings.
    • Clifford Chance has been forced to launch at least two investigations into the behaviour of an unnamed partner over alleged sexual misconduct in the workplace.

‘Informed decisions rather than judgement calls’ – Risk and compliance at Clifford Chance

The history of Clifford Chance (CC)’s risk and compliance function illustrates how BigLaw’s approach to regulatory and reputational issues has changed over the last two decades.

Until 2000, CC largely relied on individual partners’ judgement to decide whether a client or mandate was worth taking on. At the turn of the century it appointed executive partner and general counsel Chris Perrin to lead an embryonic risk function with just over a dozen staff. Two decades on, Perrin oversees a team of more than 60, divided into a risk and compliance group, and the so-called clearance centre. The latter would look at each client and mandate, and refer to Perrin any point raising concerns, resulting in the firm turning down ‘one or two clients a month’.

In April 2018, CC introduced a risk management framework formalising risk assessment procedures, with Bahare Heywood taking up the newly-created role of chief risk and compliance officer. Reflects Heywood: ‘Historically you had risk teams made up of lawyers, but there is more understanding now that risk and compliance are disciplines in their own right. Where we find grey areas, firms will want to make informed decisions rather than judgement calls.’
For Perrin, the growth in risk teams and the articulation of firms’ values are two sides of the same coin: ‘People outside the firm are more interested in what law firms are doing and young lawyers these days care more about the moral approach of the firm.’