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News Releases - Division of Media Relations and Communication Services - American Bar Association - Law - Legal

Release: Immediate
Media Contact: Nancy Cowger Slonim
Phone: 312/988-6132
Email: [email protected]

Addresses Practices and Attitudes that Contributed to Failures

WASHINGTON, D.C., April 29, 2003 -- The final report of the American Bar Association Task Force on Corporate Responsibility urges changes in corporate governance policies to create a new culture of corporate responsibility stressing constructive skepticism and active independent oversight of corporate executives.

"The report represents the latest word in corporate governance reform and the role and ethical responsibilities of corporate counsel in this post-Enron age," said Alfred P. Carlton Jr., ABA president.

The proposals will be presented in the form of policy recommendations to the ABA House of Delegates in August when it convenes in San Francisco. Unless or until they are adopted, they represent only the views of the task force.

The task force's recommended corporate governance policies also are designed to enhance the role of corporate lawyers in the system of checks and balances needed to ensure corporate compliance with law. The report also makes recommendations for amendments to the ABA Model Rules of Professional Conduct to sharpen existing duties of the corporate lawyer to the corporate client and to act in the best interests of that client when faced with illegal conduct by executive officers.

The report is being released today in a Washington, D.C., news conference by Carlton and task force Chair James H. Cheek III.

"This report goes beyond tinkering with the mechanisms of managing our nation's businesses," said Carlton. "It addresses a culture too often motivated by incentives for senior executive officers to manipulate or misreport information and for those, sometimes including lawyers, who are charged with advising or overseeing management to lapse into inaction, inattention, indifference or conflicting loyalties."

"While lawyers need to thoroughly understand the objectives and business goals of the executive officers of their corporate clients in order to advise them effectively, they still must retain a professional detachment that allows them to promote legal compliance of the corporate entity," said Cheek. "Our recommendations aim to enhance lawyers' ability to bring that independent professional judgment to bear."

Specifically addressing lawyers' responsibilities, the report urges routine opportunities for chief legal officers to communicate in executive sessions with corporate boards and for outside counsel to communicate with chief legal officers, to facilitate an internal flow of information about wrongdoing by the corporation or its executive officers.

Additionally, it urges amending the ABA Model Rules of Professional Conduct to:

  • Conform the Model Rules to the ethical rules of a majority of the states by permitting lawyers to reveal information to prevent criminal or fraudulent conduct that is reasonably certain to result in substantial injury to the financial interests of others when the lawyer's services are being used to further the fraud or crime.

  • Refine and clarify when corporate lawyers must disclose up the ladder of authority within a corporate client, and when corporate lawyers may disclose externally conduct by the corporation or its executive officers which a reasonable lawyer would conclude violates law or fiduciary duty and will result in substantial corporate injury.

  • Add a requirement that lawyers who either are discharged because they report violations internally or withdraw from serving a corporation because it refuses to adequately address violations assure that the board is informed of the discharge or withdrawal.

While the task force reiterates recommendations from its preliminary report issued in July 2002 to foster independent oversight of corporate management by directors and other participants in the governance of public companies, it also recognizes that "(d)irect operational control of American public corporations is, and must remain, primarily in the hands of their senior executive officers."

Citing recent "spectacular failures of corporate responsibility," the task force reaffirms the core conclusion from its preliminary report:

"The exercise by independent participants of active and informed stewardship of the best interests of the corporation has in too many instances fallen short."

The final report says events of the last two years "compellingly call for significant reforms and 'consciousness raising' in our system of corporate governance." The task force recommendations are intended "to enhance the ability of corporate counsel and directors to discharge their corporate governance responsibilities more effectively."

The American Bar Association is the largest voluntary professional membership association in the world. With more than 410,000 members, the ABA provides law school accreditation, continuing legal education, information about the law, programs to assist lawyers and judges in their work, and initiatives to improve the legal system for the public.


Editors Note: The full Report of the American Bar Association Task Force on Corporate Responsibility and other related materials are available on the ABA Web site at