Joan Loughrey, Corporate Lawyers and Corporate Governance, Cambridge University Press, Cambridge and New York, 2011, Hardback, xxxiii + 350 pp, £85.00; US$140.00, ISBN 978‐0‐521‐76255‐7

• DOI: http://doi.org/10.1111/j.1467-8683.2012.00931.x
• Author: Andrew Chambers
• Published date: 01 January 2013
• Date: 01 January 2013

Book Review

Joan Loughrey, Corporate Lawyers and Corporate Governance, Cambridge University Press,

Cambridge and New York, 2011, Hardback, xxxiii +350 pp, £85.00; US$140.00, ISBN

978-0-521-76255-7

Joan Loughrey has crafted this meticulously. Her subject is

both important and controversial yet her treatment of it is

impressively restrained and devoid of polemics. Her exten-

sive footnotes and bibliography source her discussion well –

much more thoroughly than is typical – making this an ideal

reference book for serious practitioners, regulators, academ-

ics, and students.

Her broad thrust is to invite us to challenge some of the

values of the legal profession in the context of the services

many of its members give to corporations. Coffee, whom

she cites extensively, pointed out in 2006 that his so-called

“gatekeepers” – the professional agents of the board and of

the shareholders – had been ineffective at preventing corpo-

rate debacles such as Enron.1His gatekeepers were auditors,

attorneys, securities analysts, credit-rating agencies, invest-

ment advisors, and proxy advisors.

Loughrey looks in depth at the role of just the lawyers. Of

course, she does so post the 2007–8 global f‌inancial crisis

though prior to the emerging 2012 crisis. While she supports

her thesis predominantly by referencing UK cases and UK

law, she also relates her arguments to the international situ-

ation – especially in the US, Canada, and Australia. Indeed,

many of her UK cases have an international dimension – as

with the New York law f‌irm Davis Polk Wardell’s report to

Shell’s audit committee on the overstatement of oil reserves

scandal which led to the departure of Shell’s CEO and CFO.

She has a chapter devoted to the international perspective.

The threads she weaves travel well and can be applied

widely.

A caricature of a “professional” accountant might be

summed up in the answer to the question “What does two

plus two add up to?” – to which the answer is likely to be

“What do you wish it to add up to?” Loughrey implies a

similarly unprincipled caricature of the lawyer who priori-

tizes f‌inding a way to give the client the desired rather than

the correct result.

She draws attention to a professional culture that fails to

stress independence from the client, and points out that

corporate lawyers in the US, Canada, and Australia have all

become embroiled in scandal as a result of failingto respond

as their societies expected. In effect, she is attributing an

“expectations gap” to the legal profession which was f‌irst

associated by Liggio with the accounting profession.2She

discusses how lawyers should respond when corporate

agents (such as management) provide instructions contrary

to the company client’s interests. Agency theory tells us that

management are the agents of the owners whose company

it is, with the board “holding the ring” between these two

parties. She discusses the common failure to properly

identify the client especially by lawyers acting for owner-

managed companies, and therefore running the risk of

oppressing minority shareholders. There are striking paral-

lels with auditors who tend to presume their client is man-

agement when their report is addressed to the shareholders.

Professionals working for organizations will often be

conf‌licted between what is the right professional act and

what is the right administrative act – even more so if the

professional is an employee of the organization rather that

providing the service from the vantage point of belonging

to an independent practice with many clients. Loughrey

refers to the commercial orientation of the big f‌irms and

how commitment to client service must be balanced by a

commitment to public service. She quotes the Smedley

Review3which states that it is far from inconceivable that “a

law f‌irm will, in the future, be regarded as having contrib-

uted to a major business collapse” because of “getting too

close to the client to enable objective advice, and of chasing

prof‌its at the expense of maintaining proper professional

standards.”

The privileges of an occupational group to whom society

gives professional status may include monopoly rights to

practice and an obligation for the client to take the service

(such as an annual audit). These and other privileges are

only appropriate if the occupational group puts the ideal of

service above the pursuit of prof‌it maximization. Indeed,

one of the UK prerequisites for an occupational group to be

given a Royal Charter by the Privy Council is assurance

that acting in the public interest comes f‌irst. Loughrey

points out that “the public interest” has been disingenu-

ously redef‌ined by the UK legal profession as merely to do

with protecting the interests of their business clients rather

than the wider public interest. She discusses lawyers acting

as “zealous advocates” and the concept of “creative com-

pliance.” She debates whether (1) lawyers should more fre-

quently assume the roles of gatekeepers, moral counselors,

reputational intermediaries and even whistleblowers, (2)

116

Corporate Governance: An International Review, 2013, 21(1): 116–117

© 2013 Blackwell Publishing Ltd

doi:10.1111/j.1467-8683.2012.00931.x