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In-house lawyers have a lot on their mind. First and foremost are issues related to their companies’ credibility — and the possibility of litigation. They are also worrying how the online world threatens their firms. In particular, blogging is bugging them.

These are the findings of Jane Shapiro, senior vice-president and senior partner with Fleishman-Hillard Canada Inc., an international public relations firm. As part of a speech she was giving to in-house lawyers on best practices in crisis management, Shapiro conducted a qualitative survey of a small group of corporate counsel online. Her main thrust: what keeps them up at night?

“They told us it is reputational issues that they are most concerned about,” Shapiro said in an interview with The Lawyers Weekly.

“They are concerned with issues in the firm that they have control of,” she noted.

Among the legal worry warts who responded to the survey, 50 per cent rated litigation concerns at the top of their list. This was followed by governance and regulatory issues, at 25 per cent each.

In fact, the three issues are closely linked, and nowhere more so than in the aftermath of the Sarbanes-Oxley Act, which was enacted in the U.S. in the wake of the Enron Corp. and WorldCom scandals to ensure compliance with federal securities legislation. SOX has now spread its legislative wings and similar legislation has sprung up in several countries including Canada and Korea.  “Overall SOX is here to stay. Too much is riding on the bottom line not to have this legislation in place,” said Joey Rogers, SOX compliance manager with Tembec Inc., an international forest products company headquartered in North Bay, Ont.

Some aspects of SOX are mushrooming — and that may be contributing directly to corporate counsel’s sleepless nights. The latest area of activity in the United States: increased enforcement. The FBI, for example, has ramped up activity on this front. At present, 52 firms are being investigated for backdating stock options illegally, 486 companies are under the microscope for corporate fraud, and 1160 securities fraud cases have been opened. In total, the number of criminal cases has jumped 16 per cent in a two-month period.

The FBI’s vigour is mirrored by the U.S. Securities and Exchange Commission. Next up on the hit list: company lawyers. “In-house counsel, in part, is viewed as the first line of defense to compliance  ... Their responsibility has not changed, but there is a growing sense among regulators that this first line has been weakened considerably or compromised,” Jacob Frenkel, chair of the Securities Enforcement and White-Collar Crime Practice Group with Shulman Rogers Gandal Pordy & Ecker in Maryland, said in an interview.

“Legal and financial professionals have to act diligently,” the former Securities and Exchange Commission counsel added, “and probably had they, many of these crises would have been averted.”
More crises of a different sort are on the horizon for in-house counsel who are seen as playing a gatekeeper role. Their work, and their decisions, will be closely monitored and investigated as necessary. “If they don’t act professionally they will be charged. This is not a matter of if, it’s when,” Frenkel said, noting that a “flurry” of cases is expected to hit the courts in the next few months.

While that threat looms, the reality of blogging is also nagging away at corporate counsel. Here’s what they had to say: one third to one half of respondents to the informal survey conducted by Fleishman-Hillard Canada stated that they were not concerned about bloggers at all; one third said they would monitor blogs and/or respond to inaccuracies in a blog; 20 per cent said they would take legal action in response to a blog; and 50 per cent said they were concerned about liability as it relates to blogging. Less than 10 per cent of in-house counsel, however, actually use a blog.

“I don’t think (in-house counsel) fully understand the implications yet,” said Shapiro. “They need to be aware of bloggers. It isn’t a fringe activity anymore.”

Indeed, said David Fraser, an associate with McInnes Cooper in Halifax, blogging is a growing activity with a debit and a credit column. “It presents a problem and an opportunity for business.”

On the downside, for companies concerned about controlling the message, the free-flowing and far-reaching blog can be menacing.

On the other hand, sharing information widely makes companies more transparent.Either way, blogging is here to stay, said Fraser. “Blogging is a young person’s interest. It is reflective of a comfort with technology. And it can’t be ignored.”

Of course, in-house counsel can’t worry about every possible problem that might land in their inbox. Not surprisingly then, Shapiro found that corporate counsel do not wile away the wee hours fretting about natural disasters, pandemics and terrorism.“In any post-9/11 environment, it is interesting to think that anyone would feel terrorism doesn’t happen. But (in-house counsel) may feel these things are remote,” she said.

When the lawsuit does hit the fan, corporate counsel need to be prepared. An essential tool in their arsenal should be a crisis plan. Three-quarters of participants in the survey said their company had such plans in place. Half also said their firm had business continuity plans prepared. However, 50 per cent of participants reported that they did not have a crisis plan, did not update the plan, or did not conduct simulations to test and improve the plan.

“Being able to respond very quickly is imperative,” said Shapiro. “If you have a plan that is outdated, it is not going to work, or if it hasn’t been tested, it will not be effective. There is a need to ramp up in this area.”

In the end, peace of mind is the best sleeping pill of all.