Is the GC best placed to be an organisation's moral compass?
With corporate entities facing increased scrutiny and moves to improve their ethical and governance frameworks, the legal team is perhaps best placed to make objective assessments based on merit.
In its “Restoring Corporate Trust” report, which was put together on the bank of more than 25 “detailed interviews” with more than 25 general counsel of ASX 100 companies, not-for-profit organisations and private companies, KPMG found that GCs are likely in the best position to act as the moral compass for an organisation.
“Whether it is a deep-rooted sense of what is right, extensive study and intellectual debate on ethics, or the unwavering pursuit of what is just, lawyers are particularly attuned to making objective assessments based on merit,” KPMG wrote.
But, the report continued, Australian GCs “appear divided on who should be the moral guardian of an organisation or whether it in fact should be any individual at all”.
A majority of the GCs consulted by KPMG resisted the introduction of a chief ethics officer, the report noted, surmising it is “a role much more common in US companies than Australian organisations”.
“Often the role of the chief ethics officer extends to investigating alleged violations of company policies, codes of conduct or other legal obligations. This extended responsibility often leads to the function falling to the GC or senior in-house counsel working within the Office of General Counsel,” the report said.
A number of Australian GCs were supportive, KPMG continued, of the concept that they would have some influence over the morally precarious decisions taken within their organisation.
“They agreed that they were uniquely placed and experienced in balancing ethical and moral tensions and they should be the one at the table to call a “timeout” when commercial considerations overtook ethics,” the report said.
That said, other Australian GCs resisted the role of moral guardian for their organisation, “pointing to inherent conflicts with their substantive role of providing fiercely independent and legally sound advice on complex matters”.
A third group rejected the concept entirely, KPMG said, “arguing that not only was it not the role of GC to be the moral compass but it should be no individual’s role, including a chief ethics officer”.
“Assigning responsibility for ‘ethics’ to an individual took away the personal responsibility every member of an organisation should have to champion ethics”, it was contended.
“A number of GCs pointed to the Hayne royal commission as evidence that ethical decision-making had to be installed as a foundational obligation of every employee. They suggested allocating responsibility to an individual allowed management in particular to throw the metaphorical ethical football over the fence.”
In the same report, KPMG found that GCs are “almost equally divided” as to whether they should also be the company secretary and that the “majority position” of GCs is that it is “appropriate, and in some instances necessary”, for them to have broader executive roles.
It further found that navigating increased regulation and managing interactions with the regulators charged with enforcing them is the most significant challenge facing general counsel today.