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!!
Bibliography/References
*Keith Rewell SC, Barrister-at-Law, Sydney, New South Wales.
1 Milton Friedman (1962) p.33
2 Burchell and Cook (2004) p.3
3 Koehn (1998) p.3
4 Davis (1973)
5 Hutton (1995)
6 Trotman (1979)
7 Adams and Hardwick (1998)
8 Paine (2000) p.322
9 Solomon (1999)
10 Sexton and Maher (1982) p.156
11 Kirby (1996) p.183
12 Kronman (1996)
13 Luban (1988)
14 Rhode (1998)
15 E.P. White (1904)
16 Dezalay and Sugarman (1995)
17 Rehnquist (1996) p.4
18 Kronman (1996) supra,
19 Kirby (1996) supra, p.172
20 Goldring (1996) p.250
21 Bancaud & Boigeol (1995)
22 Hartmann (1995)
23 Dawson, Sir Daryl (1995)
24 Dawson, Sir D (1995) supra, p.148
25 Dawson, Sir D (1995) supra, p.153
26 Longstaff, Simon (1995) p.4
27 Pound, R (1986)
28 Gleeson, M (1999)
29 O’Connor J (1987)
30 Goldring (1996) supra, p.252
31 Kirby (1996) supra, p.184
32 Barr (1979)
33 Kirby (1996) supra, p.175
34 Kirby (1996) supra, p.183
35 Barry, Sir John (1959) ??
36 Meagher, R.P (1998) p.6
37 Longstaff (1995) supra, p.16
38 Olgiati (1995) p.172
39 Davis and Elliston (1986) p.18
40 Bickenbach (1996) p.52
41 Pearce (1995)
42 Scheyer (1984)
43 Luban (1984)
44 Ross (2000) p.33
45 Ross (2000) supra, p.64-5
46 Parker, C. (1999) p.153
47 Ross, S. (2000) supra, p.94
48 The Joint Committee on Professional Discipline in the United States (1979) p.85
49 Ross, S. (2000) supra, p.105
50 Goldring (1996) supra, p.252
51 Dawson, D (1995) supra, p.148
52 Spigelman CJ (2002) p.24
53 Kirby (1996) supra, p.171
54 Bennett, D., (1996)
55 Kirby (1996) supra, p.184
56 Cranston (1995) p.30
57 Mentel-Meadow (1991)
58 Kirby (1996) supra, p.184
59 Kirby (1996) supra, pp.175, 183
60 Martin (1993)
Copyright 2005. Greek Legal and Medical Conference