Lawyers as responsible business advisors

Larry Ribstein —  6 December 2011

Katherine Franke argues that lawyers are partly responsible for the financial misdeeds protested by OWS (HT Leiter):

Implicit in the OWS protests is a condemnation of an approach to lawyering that regards all legal rules simply as the price of misconduct discounted by the probability of enforcement* * *

In recent years we have seen the increased blurring of the boundary between law and business, between the lawyer and the businessperson, and between legal and business education. Too often, being a “good lawyer” has meant taking on the role of consiglieri, providing effective legal cover for otherwise borderline, or worse, practices. Effective and ethical representation of business interests does not relieve lawyers of responsibility for the harmful effects on others created by our clients’ actions, taken pursuant to our counsel. * * *

Servicing law school debt after graduation drives many of our students to highly compensated legal work for the financial services industry. * * *

The widely held public outrage at corporate overreaching given voice in the OWS protests reminds us of the degree to which the legal profession has fallen short of its traditional role as “republican” citizen, obliged to act as guardian of public interests even when — indeed especially when — representing private interests.

Without getting deeper into the psyche of the Occupiers, let’s grant that Wall Street’s improvidence was a cause of its Occupation and that lawyers were partly to blame for this improvidence. (I hope Franke will accept the friendly amendment that the lawyers worked for the government as well as the banks.)   What should we do about this? 

For starters, and recognizing that it has become obligatory to drag the high price of legal education into everything, I don’t think the answer to this particular problem is getting lawyers out of “highly compensated legal work” in finance.  (Indeed, not that many of today’s law school grads are even being tempted by such jobs.) Nor does the answer lie in simply hoping that lawyers will feel more obliged to “act as guardian of public interests.”  Indeed, the latter strategy is a prescription for their irrelevance.

Rather, the answer is training lawyers to get more into business and finance, where they can be respected and full-fledged participants in business decisions.  Law schools don’t adequately train lawyers on the complex financial instruments and deals they’re being called to advise on. Although lawyers may come to law school with this knowledge or learn it after they leave, law school generally doesn’t train them to integrate financial expertise with law practice.  For example, they may understand how a deal works, but not necessarily what material facts about the deal need to be disclosed, or when the transaction comes too close to the regulatory line.  And even if they might have such knowledge, they need to be able to speak the client’s language in order to be sure of being listened to.

Integrating lawyers more fully into business should make businesses in and out of finance more rather than less responsive to legal considerations.  In retrospect it’s clear that the lawyers who didn’t fully advise their clients of the legal risks inherent in their complex deals and securities didn’t just let the public down — they didn’t serve their clients’ interests.

Not every deal or new security that eventually blows up should have been squelched by a lawyer.  Risk can be healthy and perfectly legal.  Anyway, clients will tend to ignore legal advisors who just say no rather than try to find ways to get things done.  But the right course of action is often unclear.  Finding it requires matching high-level business expertise with knowledge of black-letter law and underlying policies.

Taking the lawyers out of finance or blunting their authority by turning them into preachers will not get the results Franke hopes for.

Larry Ribstein


Professor of Law, University of Illinois College of Law

3 responses to Lawyers as responsible business advisors


    I have no idea who Ms. Franke is or what she knows. I spent a very long time as a corporate lawyer. I know that lawyers had less respect from their clients than interior decorators. I also know that my clients were as crooked as a country road, and that whenever they cooked up nefarious plans, they were sure to not include me. I don’t feel bad about any of it. Even after all these years, I have no clue as to what I really should have done. Probably taught history in a high school.

    I know a number of lawyers who worked on asset securitizations. I don’t think they were guilty of anything. They certainly didn’t cook up the deals, which they did not understand, nor did they sell them. Their clients treated them like the janitorial crew, and I think they bear the same level of responsibility.

    Recommending that lawyers be trained up to know as much finance as the bankers is absurd. Mostly we don’t have the math skills. They may be a few who do (one of my lawyer friends was a PhD student in Math, before he went to law school, and another has a PhD in Astrophysics), but a lot more are like me. I am not innumerate, but I cannot comprehend the level of math that the “rocket scientists” use, and lord knows I tried. But, in my 2nd year of college I dropped advanced calculus and declared myself to be a history major. I think the vast majority of lawyers are more like me than like those two guys. My own recommendation for law school is that it should be less, probably a 2 year program at a community college, followed by an apprenticeship.

    Further, I do not believe that the panic of 2008 was the result of the actions of any one person or group of people outside the government. I think it was the intersection of a fragmented and undercapitalized financial system and of a US government created and run housing finance system based on the 30 year fixed rate mortgage. (there were other mortgage forms too, like the option arm — the Gatling gun of mortgages). It should also be remembered that the financial system was designed and run by the Federal government for the express purpose of financing its operations.

    The master irony is that the law that supposedly fixed the problems that led to the panic is named after two of the guys who should go to jail — Chris Dodd, and Barney Frank. The law did nothing of the sort, and won’t make a darned bit of difference to anyone.


    Geez, this has been true for years, if not decades. Law ceased to be a calling a half a century ago. It passed by being a “profession” at least 30 years ago. It has been a bottom line business since.


    In my opinion, Professor Franke deserves an F for her paper. First, she assumes that credit default swaps and syndications of subprime mortgages are unethical, without offering any support for such a proposition. If contracts transferring risk were unethical then any consumer taking out a life insurance or medical insurance policy would be guilty. Professor Franke then advocates that attorneys have an obligation to act “for the protection of the people,” rather than to protect the interests of their client. If this were true then criminal defense attorneys should decline to represent their clients, except on the relatively rare occasion when the client is actually innocent. The New York Rules of Professional Conduct for attorneys specifically provides that “a lawyer’s representation of a client … does not constitute an endorsement of the client’s political, economic, social or moral views or activities.” If this were not the case then Professor Franke should logically resign from Columbia Law School, as it is training and delivering hundreds of new corporate attorneys to Wall Street each year to represent these allegedly immoral and unethical clients.. Professor Franke obviously has a strongly held political view concerning the OWS movement, which is her right. To suggest that other attorneys who do not share that same political view concerning the “correctness” of the OWS movement are somehow less moral or ethical in representating their business clients is the height of value laden moral superiority. That is why I gave Professor Franke an F on this assignment.