Introduction

In Chapter 3, three main ways in which lawyers could perform a corporate governance role were identified: they could act as reputational intermediaries, gatekeepers or whistle-blowers. The extent to which they are expected to, or can, perform these roles will vary depending on the circumstances and, in particular, whether they are in-house lawyers or external lawyers. For example, external lawyers often act as reputational intermediaries when they provide legal opinions on their client's behalf to third parties such as lenders or investors who will not complete the transaction with their client without such an opinion from a reputable firm of solicitors. Many lawyers dismiss the worth of legal opinions, as they are replete with caveats, but this arguably misses their point: third parties seek them because they attach value to the verification of a company's representations by company outsiders who, being repeat players in the market, cannot afford to risk their reputation on one-off transactions. In contrast, third parties do not rely on in-house lawyers to act as reputational intermediaries because they cannot develop reputational capital independent of that of their corporate employers.

Again, while both external and internal lawyers can act as gatekeepers in a broad sense, by disrupting or averting managerial misconduct, the ways in which they can do so will vary. Thus while monitoring for misconduct is often seen as a key aspect of gatekeeping, it is rarely required of external lawyers, nor are they usually in a position to perform such a role, since they lack the necessary degree of knowledge and continuous oversight of the client's business.