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Custom Ethical Dimensions of Commercial Law Firms essay paper sample

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Introduction:

This essay explores critically and discusses some of the important ethical challenges facing the State of Victoria’s (Australia) legal profession today and how those challenges ought to be approached. Its’ central focus is the ethical issues and challenges that arise for a lawyer within a large law firm in Australia today and how those challenges ought to be approached.

It proposes an overarching contention on the issue, based on analysis for a deeper understanding.

Tensions create culture with little space for ethical decision making hence discouraging ethical engagement and consequent abuse of the system. Culture plays a major role in molding lawyers’ response to any case they are involved in.  These tensions include, bureaucratic or Corporate Structure, the working Structure of firms, Competition inside the firm which include performance and career progression based on billable hours and profit motive and lastly Competition outside the firm/between firms which involves Beauty contest between firms and Pressure to exceed client expectations – close relations, confidentiality matters. By their nature, large law firms face more difficulties in leaving space for ethical decision, especially individual ethical decision. The firms are faced by a variety of formal and informal processes and challenges which ought to be addressed.

The case McCabe v British American Tobacco:

The Tobacco Company and its lawyers participated in document retention policy, a contrivance to hide evidence behind client legal privilege. Copies of documents were given to Clayton Utz lawyers and originals were then destroyed. The legal repercussions of this situation remain a topic of debate. The paper destroyers were acquitted on appeal. Then there was a huge public outcry. Then the government made it unambiguously clear that such actions are unlawful and consequently there is now a max five year jail term for willful document destruction.

James Hardie case:

Lawyers helped James Hardie set up another company to pay for asbestos claims but did not have enough funds and lied about this. GBI claimed for a large rebate from AWB on account of the fact that earlier shipments of wheat had been contaminated by iron filings. AWB claimed privilege on six documents relation o the iron filings rebate payment, but relinquished others which the Cth sought to challenge on the basis of the fraud exception. AWB inflated the price in contracts to cover both the amount of the iron filings claim and the repayment by GBI of the debt which it owed to Tigris. AWB wants to enter into a contract with IGB, but there are UN sanctions on this. Cth Govt would likely be obliged to prevent AWB from making any remittance of funds to IGB.  However, a payment was to be made which complied with the UN Resolutions: payments be made in instalments, to a company other than IGB and not in Iraq. It is clear that AWB knew that paying inland transportation fees was a means of making payments to the Iraqi Govt, and concealed this from the UN. AWB knowingly and deliberately disguised the true nature of the prices in the contracts. The transaction was ‘deliberately and dishonestly’ structured to misrepresent the true nature and purpose of the trucking fees and to work trickery on the UN. It would be contrary to public policy for the privilege to endure in communications of this kind.

Enron case

In the last weeks before Enron’s collapse and when it was already obvious that the regulator would be investigating Enron and Arthur Anderson’s audits of Enron, an in house Arthur Anderson lawyer wrote a memo reminding colleagues who had worked on Enron’s audits document retention policy. Enron lawyers have been critics for their propensity to try and preserve plausible deniability by refraining from asking hard questions that might yield awkward unwelcomed revelations that might have to be reported to directors, shareholders or regulators.

 Australian law companies are faced by a variety of formal and informal processes and challenges which ought to be addressed.

Ethical Infrastructure:

The role of ethics is not so contentious in Australia since there is a presumption that there is a core set of lawyer-client relations which hold all legal relations. The question is: why or how does confidentiality and privilege raise issues about the good conduct and relations between lawyer and client? The issue of confidential information is first one of duty to the client’s regulations. This duty is tied to values and image of lawyer, especially loyalty to the client but this is compromised when it comes to team work. The role of the lawyer as a professional and the value that it stands for is insufficient to frame a comprehensive ethical picture when dealing with confidential information. Values like loyalty, integrity and honesty, by themselves, are not very helpful in reaching a good judgment. At most, they put some wide boundaries of permitted behaviour.

An overarching ethical perspective on the issue could complement and help giving more precise shape to the lawyers’ judgement. For instance, taken from an adversarial point of view, loyalty is interpreted strictly and would require the lawyer to keep confidentiality whenever possible, even if that would cause harm to other people.. The adversarial approach here, as in other ethical issues, would serve the interests of the clients in the particular case at hand but it would lead to ignoring the wider public interests in a fair and efficient administration of justice. The adversarial approach’s duty to furthering the clients’ interest is likely to rank before its duty to the court and the administration of justice, which is a likely motivation behind the conduct of some lawyers.For instance Clayton Utz in McCabe v British American Tobacco case effectively, abused the protection of legal professional privilege. This could be potentially dangerous for the image of the lawyer as a professional. In fact, an abuse of the client’s right to privilege would taint the honour and candour of Australia and overseas, and hundreds of lawyers, it is hard to get a sense of the ethics in the workplace (Evans, Haller et al). Lawyers should conscientiously and ethically do their jobs and exercise their functions as fiduciaries in organisations structured to diffuse responsibility and prevent their access to the big picture?’. The solution to this, therefore, would lie more on the partners in each office or team to ensure that lawyers get accustomed to recognise and discuss ethical issues if they wish to.

Working structure

The other issue involved in removing individual judgement is one of working structure. With many offices around Australia and overseas, and hundreds of lawyers, it is hard to get a sense of the ethics in the workplace (Evans, Haller et al). The question is can lawyers ‘conscientiously and ethically do their jobs and exercise their functions as fiduciaries in organisations structured to diffuse responsibility and prevent their access to the big picture? (Robert Gordon: ‘A New Role For Lawyers) The Corporate Counsellor after Enron the solution to this, therefore, would lie more on the partners in each office or team to ensure that lawyers get accustomed to recognise and discuss ethical issues if they wish to. Lawyers are often blinded by being so used to the way we do things around here mimicking behaviour of a partner or team leader. Group thinking: Tactics are unspoken aspect of culture of the firm that all members are socialised into accepting without considering alternatives and their ‘strivings for unanimity override their motivation to realistically appraise alternative courses of action.’ (166)

Difficulty arises when one team leader takes questionable ethical approach, or team income is largely derived from one client so hard to resist pressure. This team attitude may not necessarily reflect the ethical values of the firm as a whole. There are other options and Opportunities for Ethical Judgment. The large law firm context may constrain their options and opportunities to exercise their own ethical judgment.’ For example, client billing often done by a separate department .Since legal work is shared, it becomes ‘difficult for any individual lawyer to take responsibility for responding to the ethical issues raised by that work.’ (167).This time they may see the bigger picture and its ethical implications, but may not be able to convey this to the client since they are just one of the lawyers working for them. Particularly in issue for junior lawyers – must be signed off by more senior lawyer – part of firm’s risk management system. Junior lawyers concern not conveyed to the client – ability to act responsibly according to own ethical judgment is frustrated. Can’t take individual responsibility for own work. This makes them feel it is not their individual responsibility in group context to express concern - ‘each feels it does not fall into their narrowly defined job description.

In large firms there is no forum to exercise ethical judgment and there is no provision to collectively resolve or query ethical issues. Obedience is another major factor that comes into play. This occurs where the individual does not want to appear disloyal, “rock the boat,” or suffer the consequences of questioning the actions of those with whom they work. To cater for these issues one can use incentives and pressures on ethical behaviour. The ‘Firm structures and cultures may create or magnify incentives for lawyers to behave unethically. This will encourage lawyers who identify an unethical issue who are capable of acting on it to choose to ignore the problem or to act against their better judgment. In a situation where a junior lawyer is working under different senior partners at different times you can encourage morality characterised by ‘organisational pragmatism rather than principled decision-making. They should apply norms in given situation of people they are working for at the time. You can also encourage survival and success within the firm to please patrons such as setting tournament for promotion.

Bureaucratic or corporate structure

This also play a role in posing a serious problem for ethics. This is because being a small fish in a big pond, a lawyer in a large law firm might not feel a strong sense of duty and loyalty towards the client’s interest and might just do its work routinely to then pass the bucket of responsibility higher up the chain. Bureaucracy plays a role in shaping managers moral conscience. This is a characteristic of social structures of law firms. The Conflicts, tensions, incentives and motivations created as marketplace exerts pressure on these bureaucracies. Bureaucracy generates a characteristic choice of norm rule. This choice of norm rule encourages a morality characterized by organizational pragmatism rather than principled decision-making. Robert Gordon points out that this problem also arises from the fact that lawyers in a large firm are often unable to see the large picture because the work is diffused around many different lawyers and even offices. Similarly to the matter of working structure of large firms, diffusion of work should not be taken to be a negative aspect of itself. Much depends on how the ethical issues that arise from diffusion of work are managed. Cutting off lawyers from seeing the big picture could happen in a firm of any size, as it would depend on how the partners in charge of the work allow the whole picture to be shared and presented among the more junior lawyers. Furthermore, the difficulty is not so much in seeing the big picture as it feeling part of the picture when lawyers are confined to work just on smaller portions of a matter. However, the amount of responsibility and sight of the big picture comes also with increased knowledge, skills and career. It might simply be that junior lawyers are not as able to comprehend the whole big picture of a large complex matter even if it is presented to them. Also, Gordon assumes that just because a lawyer is not able to access the big picture of a matter, they will be unable to discharge their fiduciary or ethical role to the client. This assumption is questionable because a lawyer might still feel equally committed and loyal to a client in doing their best within a particular issue for the client which, in the scheme of things, would compound an overall benefit to the client. Moreover, taking the opposite step and decide not to diffuse the work as much could also create potential ethical issues. If the work was not diffused as much, it would logically mean that fewer lawyers in the firm would do more work for the same client. This, in turn, might lead those lawyers to be too close to the client. This could create fertile grounds for issues like confidentiality and privilege because there would be doubts about the real independence of the lawyers from the client. (Parker and Evans;) One justification given by the legal profession for wide confidentiality between lawyer and client - is to allow for the lawyer’s role in monitoring compliance and encouraging lawful conduct, but there are few contexts in which this role is taken seriously when lawyers are placed under scrutiny.

Competition

Competition is one of the major characteristic of large law firms in Australia. Competition can pose obstacles to creating an ethical space both inside and outside the firm. Inside the firm, there is a strong competition and pressure to perform in order to climb up the career chain. Billable hours are a common measure of performance and this has the potential to make lawyers insensitive to ethical concerns in their workplace and, by extension, in legal practice. Unlike in smaller law firms, where seniority can be a more important factor, in large law firms there is a strong focus on the amount of billable hours produced by a lawyer who wants to make the next step up.. Outside the firm, the need for large firms to retain and look after their larger and more profitable clients might lead to create ties that are too close and pose ethical issues. The most common situation in which this happens is through sending several lawyers to a secondment in their client’s office. But it can also simply happen by having a whole team of lawyers dedicate to work predominantly for one client.

Recommendations:

It is with no question that ethics play a very vital role towards shaping the actions and behavior of lawyers within any working organization. Time and again, Lawyers consider personal ethical behaviour as independent and personal judgment in context of clients. The theory of individual judgement support that ‘it is only individual lawful practitioners who can be regimented or held accountable for misconduct.. Significant legal work occur within large law firms where  most legal work is conducted by teams working under the headship of a partner  which means that ethical behaviour is not only an  individual matter but also a large group or team issue. Individuals are affected by a variety of factors at organizational and work team level that sustain or challenge ethical conduct. Large law firms should design and execute ethical infrastructures to ensure both counteract of pressures for misbehaviour and positive promotion of ethical conduct and discussion.

Ethical infrastructure should not be based merely on formal ethical policies that are enunciated by management but should also involve risk that should not connect with informal work team cultures and individual values in practice. Formal and legal ethical infrastructures that do not support or support the improvement of individual lawyers’ alertness of their own ethical values and ethical judgement in practice should be discouraged. Lead partners, work cultures and practices that are taken-for-granted in each work team have a crucial influence on any personal lawyer’s ability to recognize ethical issues, resolve them satisfactorily and put their principled judgment into practice. Ethical infrastructure must connect with the variety of units within the firm.

Lawyers who hire and fire external lawyers can prioritise the interests of corporate management over their duty and to the court and the law and the obligation to their true clients’ breach of both categories. Individual  morals, skills and aptitude for ethical judgment is influential but can boil down to law firms culture and structure to precipitating and ‘amplifying unethical behaviour’. The organisational structure has on effects on dealings of individuals in business and in government.  Bureaucratic structures influence the ethical vision of those within them. Different cities, sections and teams working for different clients do  not have capacity to see ethical issues as they arise. Within a large, multi-state law firm no one individual lawyer personally know whether any other lawyer in their firm is acting (or has acted) for a client in related matter adverse to the proposed client; or whether any other lawyer in the firm has any other interest that might conflict with the duty to the new client. This creates a conflict of interest. To prevent this they should have checking systems to act as organisational reminiscence so that lawyers can begin to see whether taking on new client may create problem.

Lawyers often specialise only on small portion of work for a client and hence they might not see the “big picture” to ‘understand the ethical significance of their own work. This is more so with the junior lawyers who may not be concerned with strategy meetings. Shared perception on work and cultures with contemporaries is an important part of a functional team to work well together and cohesive. However, this can be dysfunctional where one is ‘blind’ to alternative perspectives and this can lead to lack of sensitivity to ethical issues as they might arise.

Lawyers often like to mimic the behaviour of a partner or team leader.  Tactics are unspoken aspect of traditions of the firm that all members are socialised into accepting – without considering alternatives - and their ‘strivings for unanimity override their motivation to realistically appraise alternative courses of action.

Trouble arises when one team leader takes a disputed ethical approach, or team income is largely derived from one client so hard to resist pressure. The large law firm circumstance may constrain their options and opportunities to exercise their own ethical judgment. For instance, client billing should be done by a separate department.

The firm’s structures and cultures may create or magnify incentives for lawyers to behave unethically. Lawyers who identify an unethical issue and who are capable of acting on it should be encouraged to choose to pay no attention to the problem or to act against their better judgment. Having a junior lawyer working under different senior partners at different times encourages a morality characterised by organisational pragmatism rather than principled decision-making. They should be encouraged to apply norms in the given situation of people they are working for at the time. There should also be incentives such as tournament for promotion and financial rewards on which should be based solely on the number of billable hours generated. Individual ethical behaviour requires the support of organisational level bulwarks to counteract organisational level pressures for unethical conduct.

It is obligatory to formalise and systematise ethical infrastructure as they change and grow. When they were smaller – ‘professional partnerships’ model was efficient to promote ethical conduct by embedding lawyers within networks that provided ethical obligations, expectations,  information channels and social norms. Law firms that operate as managed professional businesses, traditional, informal controls are much weaker and less able to instil a common culture including common values of ethical behaviour. There is an increased degree of mobility in the upper end of the legal profession where experienced professionals move in/out of firms or mergers making it difficult to transmit a positive/consistent/cohesive/unified ethical culture. Mayson suggests that ‘As law firms get bigger and staff specialises more, it is important for them to think explicitly about building up their ‘organisational capital,’ as well as their financial, physical, human and social capital, the strategic context, motivation, knowledge management and systems.

There should be some form of internal mechanism for checking conflicts of interest. This can be done by screening software and regular circulation of new client lists. You can also set up a conflict partners/committee for deciding what to do in event of a conflict. Firms can also hire ethics consultants to audit their ethical infrastructures  in the wake of issues that happen in the media.  Firms need to provide the time, resources and incentives for lawyers if they want their   lawyers to see ethical issues and have the opportunity to make and act on ethical judgment..

Application of moral hypothesis to lawyer’s ethics is a vital aspect of individual expression of values and should be a law firm context in which lawyers are empowered to individually and jointly deliberate over ethics in different situations and feel free to put the outcomes of those discussions into practice. Individual lawyers cannot do without ethically encouraging structures and ethical structures are less than effective without individual lawyers that are personally committed to ethical practice. Ethical Infrastructure should focus on the awareness and understanding of individual lawyers values, standards, approaches, professional conduct rules, preference of firm, ability to recognise in day to day, Capacity and willingness – to discuss, seek position of others in the firm, make judgment about competing possibilities, act on judgment and the Environment should be supportive to encourage the  discussion of ethical questions generally which should be viewed as a positive and ambitious move to improve firm operation.

It should not be a question of relying on either formal or informal processes; it is appropriate that firms have both legalistic, formal reporting procedures to deal with ethical breaches involving those members of the firm who are “beyond the reach of soft, cultural controls,” whilst simultaneously encouraging a culture of open, two-way dialogue and mutual support.

Conclusion:

 Lawyers often consider own ethical behaviour as independent and individual judgment in context of clients. Professional conduct rules reinforce the assumption of individual judgement – ‘it is generally only individual legal practitioners who can be disciplined or otherwise held responsible for misconduct.’ (159)Lawyers increasingly work in large firms or in in-house corporate legal departments, and these organisational settings are where significant legal work takes place. Within the law firm, most legal work is conducted by teams working under the leadership of a partner – means that ‘ethical behaviour is no longer only an individual matter.’ (159)­ Individuals are likely to be affected by range of factors at organizational and work team level that support or undermine ethical conduct. For instance ethical infrastructure: Formal and informal management policies, procedures and controls, work team cultures, and habits or interaction that support ethical behaviour should be originally coined in US – coined in the US to ‘refer to policies and structures that support compliance with professional conduct rules.’ (160). In paper, use broader conception – positively promoting individual and corporate behaviours, structures and rules that apply to lawyers.  Should go further than this – act to ‘equip and encourage each individual to develop and put into practice their own ethical values in dialogue with others in the firm, the profession and the broader community.’ (160) If want success, need to understand ethics in broader terms than rule compliance. Go beyond mere compliance with strict terms of conduct rules and other legal requirements. Further research required about what form/circumstance difference forms might promote in Aust context. Implementing ethical infrastructures in Aust could and should by means of reference to the Australia innovations.

There should also be extensive literature and commentary on history of illegal or unethical conduct by commercial lawyers in Australia and in Aust (PE 212-42). Questionable unethical behaviour should fall into two categories. One, there should be a Breach of ethical or legal obligations to their clients. Law firms and their lawyers should act despite conflicts of interest, or with ‘dubious attempts at managing conflicts of interest.’ (161). ‘Larger firm policies should deciding whether to accept a potential client and their use of information barriers for when they do are inadequate’. [9/10] Secondly inthe courts, there should fair operation of the legal system and the public. The courts should assist clients in commission or “cover-up” of illegal or unethical behaviour [12]. They should also design “creative compliance” strategies for avoiding or evading legal obligations. Lawyers may ‘prioritise the interests of corporate management over their duty to the court and the law and the duty to their true client No doubt that individuals values, skills and capacity for ethical judgment is influential but can boil down to law firms culture and structure to precipitate and ‘amplify unethical behaviour’. Effect of organisational structure has on actions of individuals in business and government has long been recognised by sociologists, psychologists and management scholars.  Bureaucratic structures influence ethical vision of those within them.

In case where the attorney often is not an independent moral agent but an employee with circumscribed responsibility, organisational loyalty, and attenuated client contact. Under such circumstances of professional ideals personal autonomy and public responsibility may prove of employing institutions. Within a large, multi-state law firm no one individual lawyer should personally know whether any other lawyer in their firm is acting (or has acted) for a client in related matter adverse to the proposed client; or whether any other lawyer in the firm has any other interest that might conflict with the duty to the new client..

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