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SOCRATES’ OXYMORON
Business Ethics and the Professions
Keith Rewell SC*
Socrates distilled all ethical questions into just one:
“What ought a person do?”
The Greek philosopher was, as far as we know, no
great man of commerce.
But can business ignore Socratic self-examination in
making commercial decisions?
Milton Friedman certainly thought so1:
There is one and only one social responsibility of business – to use its
resources and engage in activities designed to increase its profits, as
long as it stays within the rules of the game.
If the bottom line for business is always profit, is Socrates’ question relevant? Is
ethics in business a contradiction in terms? Socrates would be pleased: there is a
new shift towards corporate social responsibility; commercial organizations are being
repackaged as “Corporate Citizens”2.
There is a growing view that cynics who dismiss the notion of “ethical business
practices” as a hopeless dream, do so because of self-interest, or from a lack of
respect for their fellow citizens. Work and business are integral parts of all our adult
daily lives. If ethics in business is an oxymoron, other societal ethics may also
become a lost cause3.
The view that businesses may have moral duties which extend beyond profit
maximisation, has existed for many years4. It has been argued that the legal pursuit
of profits as a sole basis for business strategy, is simply too narrow5.
Advocates of ethical business strategies assert6 that principals and stockholders of
businesses are themselves growing more anxious to ensure that businesses behave
ethically, if for no other reason than as a form of risk management or risk reduction
strategy.
In any event, it may legitimately be argued that ethical business strategies are
compatible with the objective of profit-maximisation, in that a business which is
regarded by consumers and other stakeholders as “ethical” may be in a better
position to maximise its future markets and earnings7. The assumption that
consumers would prefer to deal with businesses where a relationship of trust exists,
is probably well justified.
Consumers, governments and other stakeholders will no longer ignore unethical
behaviour by business, whether or not that behaviour is productive of short-term
profit. The perception that the ethics of an organisation or profession are fragile,
undoubtedly has an adverse effect on the demand for its services by consumers,
even if those services are otherwise free from any tangible defect. And public
criticism of the ethics of a profession creates another opportunity for eager
bureaucrats and politicians to interfere further in its business.
In a positive sense, high ethical standards promote corporate reputation in a way
which might not be able to be achieved by advertising; further, the quality of its goods
and services will be trusted by consumers, without it having to be expensively
proved.
These principles apply equally to the professions, whose services will be more
readily accepted if there is an element of trust associated with the underlying ethical
values of the profession.
Indeed, consumer perception of the quality of goods or services produced by any
organisation (or profession), may depend just as much on the image of the
organisation as to its honesty, reliability and concern for the consumer, as on the
inherent properties of the goods or services themselves 8.
It may therefore be argued that ethical strategies are inherently productive, in an
economic sense, as much for the organisation that develops and employs them, as
for the community at large. The assumption that an emphasis on ethics means an
increase in unrecoverable costs, may no longer be valid.
The case for ethical business is compelling; in the particular context of the medical
and legal professions, with their special responsibilities and privileges, the converse
is now barely arguable.
There are at least three good reasons for the professions to defy Friedman, and to
act ethically in a business sense, even at the expense of short-term profit. First, the
economic case: a responsible image can be a competitive advantage over those who
are socially corrupt; second, ethical strategies assist professions to develop stronger
links, based on trust, with the local communities in which they operate; and third,
there is less risk of the activities of the profession creating damaging publicity9.
In any event, the professions are in a different position to other organisations.
Consumers and governments of the 21st century are no longer prepared to allow
professionals to “regulate” the markets for their services; the monopolistic and anticompetitive
practices of the past have been exposed for what they were; and the
need for real and transparent efficiencies in the delivery of professional services is
now inescapable.
Where does this leave the ideals of professionalism and ethical conduct for those
who practise in medicine and the law? Can past ethical standards be expected to be
maintained by physicians and lawyers in an uncompromising new world of harsh
commercial reality? Is professionalism now a mirage, eroded by the need to maintain
profit in an ever more competitive market? How do the attitudes of today’s
professionals reflect these values?
This Paper will focus on these issues as they affect lawyers, because that is the area
of the author’s experience. But other professionals, and in particular physicians, now
face similar dilemmas.
Commercialism and the Practice of Law
The conflict between commercialism and professionalism is well-worn. Many
professions have had to meet the challenge of economic, technological and social
change, whilst attempting to preserve the standards of skill and ethical conduct which
are their stamp. Some have been tolerably successful; others (accountants are an
arguable example) may have allowed themselves to be devalued in the eyes of the
broader community.
The legal profession in Australia faces the same challenge. It must move with the
times. In the past, the legal profession has been justly criticised for its fierce (and
successful) resistance to any change or innovation in the provision of legal services
to consumers10. Scholars and jurists with a passion for constructive reform of the
Australian legal system, like Michael Kirby, a Justice of the High Court, believe the
time has come for reorganisation and re-education of the legal profession, in a way
which will provide more effective and affordable access to legal services 11.
The challenge is not unique to the profession in Australia. It pervades American legal
literature over the last century. Prominent jurists and academics in the United
States, including Kronman12, Luban13 and Rhode14, all expound upon the problem;
but they offer no answer.
A Global Obsession
More than 100 years ago, a little-known American lawyer wrote15:
“The law business is not what it used to be. The expression “law
business” itself marks a certain change. This business side of the
profession has assumed paramount importance, and the profits of the
business are our most practical concern.”
During the last century, the influence of business on the practice of law in America
has inexorably increased. The major law firms are now on the scale of corporate
giants. Their ability to penetrate foreign markets has influenced a restructuring,
along American lines, of the methods of legal practice in other countries16.
The rise of the big law firm, capable of providing conveniently packaged legal
services “24/7” and world-wide, has changed forever the perception of lawyers as
bespectacled scholars with a frustrating obsession for detail.
This may not auger well for ethical standards in legal practice. In 1996, William
Rehnquist, Chief Justice of the United States, lamented that “the practice of law is
today a business, where once it was a profession”17. Railing against the mass
production of legal services, the Chief Justice likened lawyers to “pencil-sellers”; he
despaired for the future of the traditional lawyer-client relationship.
In the same year, Anthony Kronman18, Dean of Yale Law School, published a lengthy
review of the state of the legal profession in America. The result was a withering
exposé of lost ideals, lack of self-discipline, and poverty of public spirit amongst
increasingly business-minded lawyers.
Kronman’s work is dispiriting for even the most ardent idealist. He believes that legal
professionalism is in steep decline, in no small measure because of the pursuit of
profit. Cases must be won at all costs: the viability of “the Firm” may depend on it.
The client dictates the course of a dispute. Rather than providing objective and
cautionary counsel, the lawyer is prepared to adopt the business practices of the
client. The business view of legal practice draws the lawyer into the client’s cause;
the detachment which was once the mark of professionalism has all but
disappeared 19.
Is the malady Kronman describes solely an American phenomenon? In Europe,
lawyers have no real tradition of engagement in the field of business20. In many
European countries the elite of the legal profession are academic, not practising,
lawyers, who regard business with thinly-disguised disdain21. But the lure of
involvement in commercial enterprise may be irresistible.
In Germany, lawyers who practise in business and banking are already the most
influential members of the profession, in both a commercial and a political sense22,
and this trend is likely to spread as the economies of continental Europe become
more and more interdependent.
Historically, the most direct and pervading influence on the legal profession in
Australia is the British legal system. Recent legislation in the United Kingdom, such
as the Competition Act 1998, has been modelled on European Community law. The
main focus is now on consumer benefits. At the same time, there has been a rise in
the dominance of large law firms, in parallel to the American experience. There is no
reason to doubt that the trend towards commercialism in the United States, is just as
keen in the United Kingdom.
Has the malaise in the practice of the law said to be endemic elsewhere, also
affected the legal profession in Australia? Or has geographic isolation, and a very
different legal history and tradition, been a shield against the worst of the American
influences?
Similar views to those expressed in America by Kronman and Rehnquist, were put
forward in Australia by Sir Daryl Dawson23 in 1995. The title of Dawson’s work, “The
Legal Services Market”, would itself have offended traditionalists. Dawson24 spoke of
the provision of legal services as a “commercial activity”; he acknowledged that
certain business practices would undoubtedly serve the interests of consumers. But
Dawson25 also criticised what he saw as “a strictly commercial and entrepreneurial
approach to the practice of the law” developing in Australia. Just how well does this
sit with the ongoing recognition of lawyers as one of the senior professions, or for
that matter, as a profession at all?
The Law as a Profession
Simon Longstaff26 points out that no profession exists as of right – professions are
social artefacts; they exist only because society recognises their existence; and
society recognises the professions, and then accords them certain privileges,
because they provide many public services which cannot otherwise be obtained
through ordinary market forces. The meaning of a profession cannot be limited to its
economic sense; there is an essential element of public duty.
For these reasons, a more demanding definition of the word “profession” is required.
Roscoe Pound offered the following27:
The term refers to a group … pursuing a learned art as a common
calling in the spirit of public service – no less a public service because
it may be a means to livelihood. Pursuit of the learned art in the spirit
of public service is the purpose.
The Chief Justice of the High Court of Australia, Murray Gleeson28, emphasises the
public duty of lawyers involving the administration of justice for social good, adopting
the words of Justice O’Connor of the US Supreme Court29:
One distinguishing feature of any profession, unlike other occupations
that may be equally respectable, is that membership entails an ethical
obligation to temper one’s selfish pursuit of economic success by
adhering to standards of conduct that could not be enforced, either by
legal fiat, or through the discipline of the market.
Towards Ethical Business Strategies
An analysis of the literature concerning the tension between commercialism and
professionalism in legal practice, leads the reader to ask a disturbing question: how
to ensure that business practices and strategies used by the legal profession are
always consistent, not only with obtaining a reasonable financial return for the
practitioner, but also with maintaining the enduring ethical responsibilities of the
profession.
The answer is by no means obvious. Academics and jurists agree that the future of
the legal profession will not be found in economics alone30 31. The challenge facing
the legal profession in Australia must be considered in the context of its history, for
this is the root of its traditional ethics and values, and importantly, of its controversial
right of self-regulation.
One solution is to let the profession have its head; to allow it to exploit to the full its
“Parliament-conferred monopoly”32. But it is precocious to disregard past standards
of professional behaviour, or to label those who champion traditional legal ethics as
old toffs engaging in tiresome nostalgia33. There is a respectable argument that, in
the interests of its own survival, the legal profession must preserve, and if necessary
defend, ethical rules and practices above mere self-interest, and specifically above
pure commercial advantage34.
Preserving Professionalism
Almost 50 years ago, Sir John Barry praised the professionalism of lawyers in
Australia35:
All things considered and notwithstanding popular scepticism, a
remarkable and praiseworthy feature of the legal profession is that
the vast majority of practitioners, whether in court or in the office,
have maintained high standards of professional behaviour despite
the pull of conflicting interests, and continue to do so. Individual
qualities have a good deal to do with this state of affairs, of course,
but lawyers are controlled to a much greater extent than perhaps
they realise by the honourable traditions of professionalism … this is
all to the good, for it is far better to behave virtuously from inclination
and training, than from fear of disciplinary consequences.
Barry’s confidence in the inherent ethical behaviour of lawyers may have been
overstated, or simply misplaced. In fairness, the last 50 years of the history of the
profession have probably presented far more temptation towards unethical conduct
and self-interest than ever before.
The complacency with which ethical standards of professional conduct were viewed
50 years ago, is no longer acceptable. Rapid and significant changes in the way
legal practice is now conducted in Australia demand much more.
R.P.Meagher36, former Justice of the New South Wales Court of Appeal, argues that
if the practice of law is subjected to progressive commercialisation, and the
community treats the legal profession as if it were just another industry subject to
market forces, it cannot expect that lawyers will feel a special duty to promote the
public interest – instead, lawyers may be expected to vigorously pursue self-interest
above all else37. And if that occurs, professionalism will disappear.
The expansion of economic competition not only removes or alienates barriers to
supply; it alters the structural environment through which legal services are provided.
Commercialisation of legal practice means traditional arrangements may be
irreversibly discarded, or at least diluted. The profession may become detached from
humanitarian concerns38, and instead be forced to package its “product” for sale in
the “market for legal services”.
What, then are the means by which to measure behaviour which satisfies the
description of “professionalism”, and may therefore be regarded as an acceptable
starting point for ethics-based business practices and strategies? Compliance with
“codes of conduct” is taken for granted. Also, observance of the duty of absolute
honesty to the Court. So now, is the obligation to identify the social good or public
benefit at stake in one’s behaviour39.
But how to reconcile these obligations with demands for a free and transparent
market for legal services?
In theory at least, lawyers are prevented from engaging in the unrestrained pursuit of
profit at the expense of ethical conduct, by two duties fundamental to the practice of
law: the fiduciary duty owed to the client to ensure that no conflict of interest,
commercial or otherwise, arises as between lawyer and client; and the paramount
duty owed to the Court to uphold the interests of justice – the “moral mandate” of the
profession40:
Lawyers are entrusted to serve their clients faithfully, loyally and
competently; yet as professionals they also owe an equivalently
onerous obligation to preserve and sustain the integrity of the legal
system itself.
Pearce41 examined the shift in the “professional paradigm” in the law, under the
pervading influence of commercialism. He concluded that lawyers were to be
distinguished from businessmen because of the lawyer’s overriding commitment to
each client, and to public service through the legal system.
Chief Justice Gleeson believes that the essential role lawyers must play in the
administration of justice is the source of the ethical obligations which are an integral
part of legal practice. Many other businesses may conduct their affairs in their clients’
best interests and with ethical integrity; but, in the Chief Justice’s view, it is the fact
that lawyers owe an ethical duty to the community and to the legal system which
distinguishes them as a profession different from any other. And it is the fulfilment of
those duties in the face of ever-increasing commercial pressures which is the
measure of their professionalism.
A number of philosophers have studied the behaviour of lawyers confronted with
ethical problems. Scheyer42 and Luban43 edited extensive collections of articles and
essays in this area, but little, if any, consistency or pattern of behaviour is to be
found44.
The ethical dilemmas considered in these studies relate primarily to conflicts
between duties to clients and simple morality, or to conflicting duties to clients and
courts, or things lawyers do on behalf of their clients to the detriment of the
community as a whole.
Professionalism must surely require that behaviour in all areas, including commerce,
is of a high, almost irreproachable ethical standard. Individuals cannot lay claim to
“professionalism” in their work, if at the same time they engage in business practices
such as tax evasion, leaving them open to disbarment or criminal punishment. No
“code of conduct” can possibly hope to deal with every ethical conflict or moral
dilemma45.
Professionalism requires the individual to behave in accordance with ethical
standards and personal values which are also consistent with maintaining the right to
be a member of the profession, and with promoting, or at least preserving, the
elevated status of the profession in the community. No study concerned with the
meaning of “professionalism”, in any field of endeavour, can ignore the role of ethics
and values.
Self-Regulation
The community’s perception of the ethical standards of a profession depends, in part,
on the profession’s willingness to permit transparent examination of the (mis)conduct
of its members. But it may be argued that there is good reason in the profession
having at least partial responsibility for the enforcement of its own codes of conduct.
Christine Parker puts the case in this way46:
Allowing, even enforcing, elements of self-regulation encourages lawyers to take
their public responsibilities seriously. It requires lawyers to create the institutions and
associations in which professional community can grow and in which debate over
ethical issues can take place.
It would probably be impractical to create a meaningful code of professional conduct
without the cooperation and active participation of the members. In the process, the
profession is required to make its professional standards public.
In recent times, there has been a tendency to establish different procedures to deal
with consumer complaints relating, for example to the cost of legal services, from
disciplinary matters. In general, there is little resistance by the profession to the
handling of consumer issues by an administrative body; but complaints as to
misconduct are still largely the domain of the professional associations. It is argued
that disciplinary proceedings, in which the accused practitioner may face the loss of
the right of practice, demand a degree of quasi-judicial fairness that cannot be
guaranteed other than by a hearing by professional peers.
But the profession’s power of self-regulation is by no means exclusive, and is, in
some respects, illusory. All States have enacted legislation for the regulation of the
legal profession, through which government has power to impose by law, standards
of conduct required of legal practitioners. And that power has been, and continues to
be, regularly exercised.
In recent years, a number of new obligations have been imposed on lawyers through
regulatory legislation, including requirements to disclose criminal acts or acts leading
to bankruptcy; restriction of inappropriate forms of advertising; and penalties for
providing legal services in connection with hopeless or vexatious litigation. The trend
towards the external regulation of professional conduct and business practices, is
expected to continue.
Stan Ross47 listed the various arguments in favour of self-regulation by lawyers.
First, they have traditionally maintained a decent standard of service to the
community; second, this system of discipline has managed to encourage a
reasonably high standard of behaviour by practitioners; third, and most important, the
alternative of government regulation is inappropriate where lawyers are required to
protect their clients against arbitrary or capricious behaviour by the government itself.
A much less persuasive argument is that non-lawyers cannot properly understand
the appropriate standards and issues; where the public benefit is at stake, the
opposite may be true.
It is now generally recognised that the community should have a role to play in the
regulation of professional conduct. The Joint Committee on Professional Discipline in
the United States in 1979 coined the public view48:
There is a human tendency to suspect the objectivity of a discipline
body composed solely of members of the respondent’s professional
colleagues (and) involving public members helps allay that suspicion.
With this aim, most Professional Conduct Committees now include lay and/or
academic members, who bring to the committees a range of backgrounds and fields
of expertise. This involvement of members of the broader community enables the
legal profession to become more sensitive to public needs, and can only increase
public confidence in the profession, as consumers become aware that non-lawyers
have a voice in the regulatory process49.
The dilution of the profession’s right of self-regulation is likely to continue. And this
can only be beneficial, in an environment where consumers of legal services demand
better access and cost-efficiency than before. In a commercial as much as legal
sense, the solicitor-client relationship depends on trust; clients are more likely to
have trust in members of a profession that subjects its practitioners to rigorous and
transparent standards of professional conduct.
Transparency in the enforcement of codes of ethical conduct, requires the
disciplinary processes to be removed from the exclusive control of the legal
profession, however painful that might be to past guardians of the treasured right of
self-regulation.
The State of Play in 2005
The intrusion of business into legal practice is now a fait accompli. Eminent legal
scholars, including Kronman and Luban in the United States, and Ross and Goldring
in Australia, sadly concede that the practice of law is now more a “business” than
anything else. And the prevailing ethical standard in business is always the “bottom
line”50.
It serves little practical purpose to bemoan the pre-packaging of legal services and
the commercialisation of legal practice; academics and jurists like Sir Daryl Dawson
recognised this to be a truism a decade ago. Better to acknowledge, as Dawson
did51, that the introduction of certain mercantile practices has doubtless improved the
accessibility, efficiency and value for money, of legal services.
James Spigelman, Chief Justice of New South Wales, describes the current state of
play as a “balancing exercise”52, in which the real value to consumers of
commercialisation and unrestricted competition between lawyers is still to be
accurately assessed. Certainly, there is now a presumption in favour of the operation
of market forces. But it is not absolute: the power of government has already been
used to restrict competitive strategies that are against the public good; if lawyers
hope to retain even limited autonomy in the future, they will need to consider for
themselves the ethical basis of their conduct.
In any event, some of the “ethical” rules and practices developed by lawyers had to
change. Justice Michael Kirby questions whether the “professionalism” of the past
was “merely a self-deceiving disguise to preserve a large hold on power in society”53.
Many of the indefensible rules and practices have now been disposed of. Reform of
the legal profession and practice has already begun, and in ways beneficial to the
efficient provision of legal services in Australia54.
There is no doubt that the profession must adapt to advances in technology on a
global scale, and to the sophistication of consumers; at the same time it must strive
to provide legal services more efficiently but with the same high ethical standards
embodied in the best of the old rules55. Scholars such as Cranston56 and Mentel-
Meadow57, suggest that legal education must go beyond technical rules of conduct, if
it is to equip future lawyers to deal with ethical challenges they will face in their
business and professional dealings.
But the present dilemma cannot be left to be resolved by future generations. Justice
Kirby58 is clearly correct in his view that the answer will not be found in economics
alone; he proposes, in general terms, sweeping changes, not only in the attitudes of
the legal profession, but in its composition by race and gender, and in its spirituality.
The overriding task is to ensure that ethics and values sit equally comfortably with
the practice of law as a business, and as a noble profession. Those who contend
that the task is incongruous, and that business is an anathema to ethical legal
practice, must be put right. It is unarguable that, in the interests of its own survival,
the legal profession must preserve some ethical practices above pure commercial
gain59.
And ultimately, it is to the profession’s advantage, both in an economic and social
sense, that the community be reassured of a continuing commitment to these ethical
duties, even if they conflict with short-term profit60. A loss of public confidence in the
legal system may lead to a downturn in the demand for legal services sufficient to
threaten the viability of the profession.
These, then, are some important dilemmas faced by lawyers of the 21st century in
Australia. No doubt, medical professionals are confronted by similar issues, as large
medical centres send traditional general practices closer to extinction, and the ailing
public hospital system calls for financial sacrifices by specialists.
Professional practice is now a business. But without ethics, the professions are
nothing. Business ethics simply cannot be allowed to be an oxymoron.
Remember - Socrates is watching!!
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