When Do Legal and Compliance Professionals Need to Say “No” to the Business?

Once upon a time such soft skill as a “business orientation” was not highly popular among in-house legal counsels. Lawyers in corporations felt privileged to say “no” to the business. As I remember those days, quite often a lawyer could kill a potential business idea or a deal bearing no consequences for the incompetence. Obviously, such attitude could not last for long and lawyers had to learn “business orientation”. This is when lawyers are not supposed to say “no” to business ideas, but must focus on finding alternative solutions instead. This shift not only affected in-house counsels, but also compliance professionals, soon after the profession emerged.

Although mentioned evolution is generally a good thing (after all, we are all in the same boat with the business), what wonders me is how far business orientation can go. Recently, I was invited to contribute at Corruption and Corporate Fraud Prevention Conference, where I had a chance to discuss various topics with peers. I realized that some legal and compliance professionals are so focused on maintaining good relationships with business colleagues (their internal and external clients) that there are hardly any legal and ethical limits. The important question of today is the following: when do legal and compliance professionals need to say “no” to the business?

To illustrate a scenario of extreme business orientation, imagine the following conversation between Chief Executive Officer (CEO), General Counsel (GC) and Chief Compliance (and Ethics) Officer (CCO).

- CEO: Dear gentlemen, I invited you today to advise me how to execute our No.1 business priority in this financial year in Ukraine. As you know we have multiple issues with custom authorities which affected our sales last year. We have to establish a good relationship with the newly appointed head of customs office, Mr. X, by paying for his trip to Hawaii. It is important that we figure out how to do it with the least risks possible.

- CCO: As far as I am concerned such behaviour is prohibited under anti-corruption and criminal laws. But since it is so important for our business, I suggest that we arrange a faked lottery to take care of this. However, an engaged third party may request a substantial fee for its services.

- CEO: This is a good idea. However, maybe our legal counsel can come up with an alternative and maybe cheaper solution?  

- GC: . I just checked the official schedule of Mr. X and it seems he has a scheduled visit to Country Y in August. So, in my view, our travel agency, which is very loyal to us could pass the cash directly to him there. Country X is a country with a low anti-corruption enforcement and not a member of OECD Anti-bribery Convention, which lessens the risk of being brought to liability. And I believe that this option will be a more cost efficient as well.

I hope you had some fun of this imaginary dialogue. As opposed to old “no go” approach, here you see the extreme – “yes you are welcome” attitude. Of course not entirely similar, but the same flavor dialogs may take place in real life at any management level in any global and local company. Moreover, such conversations can easily jump into email communications, thus leaving a documented trail.

In my view, legal and compliance professionals may only allow such kind of dialogs if they forget 2 things:

  1.  They are business counsels who are personally liable for their own decisions. They can easily sail to prison in the same boat with company's management for criminal conduct. 

  2. Their dominant client is not any particular individual, who cannot overcome professional challenges in an ethical way, but the entire company, which risk appetite may be different from that individual.

In the above scenario CEO could not understand the difference between business orientation and criminal intent. The job of both legal and compliance counsels is to stop such conversations and explain which behaviour goes beyond the legitimate business purpose. Any further discussion about the details is nothing else but creating evidence of a crime.

Of course, such “no” conversations with the business do not go easy. Legal and compliance professionals have to be very intelligent. If such sensitive dialogs go unprofessionally, one may risk his or her career. Legal and compliance professionals shall do their best in terms of persuasive communication to show and prove by examples particular risks both for the company and the CEO in short term and long term.

A good approach would be to use a “why” technique. In our imaginary dialogue above it would allow focusing discussion around resolving issues with custom authorities and not how to pass money to public official.

To conclude, lawyers and compliance professionals must see the difference between (1) a legitimate business purpose and (2) an intent to commit a crime. In the first case they need to apply business orientation and help the businesses they serve by cultivating a number of flexible options. In the second case they need to stop such verbal or written communications and explain that further discussions generate evidence of conspiracy to commit a crime, which may lead to other, more significant problems in the future.