"Legal is Too Conservative!"

Anyone who has worked on an in-house legal team for more than five minutes has heard someone in the organization complain the legal team is too conservative.  Sometimes those complaints are completely valid.  Legal teams can sometimes be so risk averse that they tie the business in knots and make it difficult or impossible to innovate or take calculated risks.  Sometimes those complaints are completely invalid and are made to discredit the legal team and create space to ignore its advice.

Legal leaders should be constantly testing and recalibrating the team's advice to protect against a culture of conservatism that can gradually and unnecessarily constrict the business . Business leaders concerned about potential conservatism should constructively engage the legal team in a discussion of whether its advice in critical areas is appropriately calibrated to the actual risks faced by the company.  They should discuss at a detailed level the legal team's risk tolerance and whether the advice would change with a different, but appropriate, level of risk tolerance. In many cases, a review of the team's advice after such a discussion will reaffirm the team's prior advice.  However, in many cases a discussion of the business and risk environment, and/or a reassessment of the company's risk tolerance, will lead to a shift in the legal team's advice.  This back and forth is healthy and necessary in any organization to accommodate an ever changing business and risk environment.  Business and legal leaders should actively engage in and encourage these discussions.

The danger arises when people start using "Legal is Too Conservative" as an epithet, or as an excuse to ignore or discredit the legal team's advice.  Saying "Legal is Too Conservative", or some form of that sentiment, is especially corrosive when it is stated "publicly" internally by senior leaders.  Imagine a CEO, Chief Commercial Officer, a division leader, or even a Chief Legal Officer, proclaiming that "Legal is Too Conservative."  The downstream consequences of this tone coming from the top can be highly deleterious to building or maintaining the company's culture of compliance.

For one, anyone outside the legal team who hears those comments now has "permission" from senior leaders to discount the legal team's advice.  By saying "Legal is Too Conservative" in those settings, leaders are telling those who are supposed to follow the rules that the leader disagrees with the rules as legal has interpreted them.  That the advice should be different and the organization should act differently. That business teams should challenge or ignore legal's advice, or avoid involving the legal team altogether.

Another consequence of senior leaders proclaiming "Legal is Too Conservative" is that people on the legal team now have to ask themselves "What advice are my leaders expecting me to give?"  Are senior leaders telling the organization it is okay to violate the law?  Are senior leaders obtusely telling the legal team to give advice that materially raises the company's risk tolerance and risk profile?  Are senior leaders subtly threatening the jobs or internal careers of those on the legal team whose advice is deemed "too conservative"?  Will members of the legal team now consciously or subconsciously calibrate their advice to protect their jobs and careers?

The most compliant organizations I've dealt with had leaders who told their teams to aggressively execute the business plan but to do it ethically and follow the rules.  Those teams were very good at creatively executing their business objectives by working with, and appropriately pushing, the legal team to constantly reassess its advice and collaboratively identify innovative paths forward.  Those leaders who claimed to place a high value on compliance, but never gave their teams the instruction to be compliant, led teams that gradually descended into non-compliance or ambiguity about the importance of compliance.  These teams weren't intentionally non-compliant, compliance just wasn't something their leadership told them to pay attention to, so compliance became an afterthought.   And, finally, I've seen leaders tell their teams to aggressively pursue the business, but not to allow the legal team's conservative advice to hold them back.  You can imagine the downward sloping effects on a leader's compliance culture created by that instruction.

Tone from the top matters.  People under pressure to perform take their cues from their leaders.  If their leaders tell them to execute the business aggressively, but compliantly, they will do so because their leader has not only given them permission to follow the rules, they set an expectation that rules will be followed.  People who have leaders who are silent on compliance, or who actively push their teams to be suspicious of legal advice by saying "Legal is Too Conservative", end up with teams who fear being blamed for following the rules when business results don't meet expectations.  That fear leads to corners being cut, compliance being degraded and, eventually, to non-compliance.  Non-compliance can add up to big trouble.

I've seen it proven over and over again. Tone from the top matters.  Clarity on the importance of following the rules matters.  A leader's words or silence matters.  Leading by example matters.  Giving people permission, and expecting them, to follow the rules matters. Constructively engaging the legal team and not weaponizing "Legal is Too Conservative" matters.