ÀÏ˾»úÎçÒ¹¸£Àû’s September session for in-house senior counsel focussed on key learnings from the Post Office scandal, and how both junior and senior counsel can challenge and engage the right culture to avoid a repeat of corporate scandals. Iain Larkins, Managing Director at Radius Law and Gail Harrison, Managing Director at Sewells discussed the importance of maintaining strong corporate governance.
The Post Office scandal – a quick summary
The Post Office scandal, also known as the Horizon IT scandal, saw the incorrect prosecution of over 900 sub-postmasters for alleged misappropriation of funds, where it was, in fact, due to shortfalls in the Post Office’s new Horizon accounting system. Many sub-postmasters paid from their own pockets to avoid prosecution; some were suspended without pay. Group litigation against the Post Office started in 2015, with the court deciding in favour of the sub-postmasters in late 2019. The scandal, known as the UK’s biggest miscarriage of justice, has been depicted on television as a series and a compensation scheme has been set up for sub-postmasters affected. For more information on the compensation scheme, please read our Practice Note:
The Post Office, in written submissions to the court, apologised ‘undeservedly’ for the errors, but an apology must be followed by changing culture to avoid a repeat of such scandals, which is precisely what September’s session aimed to address.
Not the first time, definitely not the last
Iain highlighted, however, that this is not the first instance of a corporate failing, and most definitely not the last. Examples include unethical trading reports on Boohoo, financial irregularities with Axiom and phone hacking by The News Group. The most important thing we can do is learn from past failings.
What do lawyers have to do with it?
The Post Office inquiry has shown that many people in the organisation, including lawyers, became involved and failed to do the right thing and flag corporate governance failings. How do we avoid becoming embroiled in the wrong thing, Iain asked. How do we ensure that our organisations have a good corporate governance system? Iain asked himself, had he been in the Post Office in the early 2000s, would he have become embroiled in the scandal? As junior counsel, he said yes.
Iain also referred to the Solicitor’s Regulation Authority’s , which notes the need for a focus on ethics in ‘day-to day learning and work activities’.
Asking the audience
Iain turned to our attendees, as asked what the most important action is that an organisation should take to avoid being the next Post Office. Common themes included:
Most in-house lawyers described their organisation as one that tries to do the right thing, but still has room for improvement. When asked if the in-house lawyer’s job is to advise on the law only or also on ethical and integrity issues, 93% chose the latter. They were also asked if they felt that they always can provide objective advice, free from commercial and business pressures, with which 47% disagreed. Lastly, when asked if their organisations have systems and processes to ensure that legal advisers are always able to meet their regulatory objectives, 43% noted that this is only partial.
Fostering the right culture
In conversation with Gail, Iain raised the question of fostering the right culture to empower everyone to do the right thing in responding to corporate governance failings. Gail noted that we only really hear about culture when things go wrong. It’s something that is incredibly difficult to measure, and quite hard to get right. Gail highlighted three things for fostering the right culture:
Please see for further reading on the role of culture in corporate governance.
HOT conversations with Gail
Something that struck Iain, in relation to the Post Office scandal, was that clearly many people in the organisation knew that things were wrong, but they did not speak up. We have seen this happen in many corporate failings. What do we need to do to get people more willing to speak up?
Gail noted that as humans, we find comfort in remaining quiet. It is the safer option and allows us to avoid conflict. Especially in traditional organisations such as the Post Office, people are conditioned to behave a certain way as hierarchy is often quite prevalent. This makes it harder to challenge the actions of someone in a more senior role. What do we do about it, as those in more senior roles? We have HOT conversations.
This can help us create a safe space in organisations, allowing people to feel safe communicating with us. Gail emphasised again, the need to communicate outside of our silos, to become more involved in what goes in the organisation as a whole and to encourage transparency. In-house lawyers must be more curious about the organisation, beyond compliance and legal matters. Lawyers must raise discussions about ethical dilemmas and discuss them from a legal perspective to educate others. Demonstrating acts of leadership will also for allow in-house lawyers to be seen as a ‘safe space’ to discuss ethical issues with.
Culture is the bare minimum
When asked about common practices now that may raise eyebrows in the future, Gail noted that although we do not have a crystal ball to look into the future, we can give thought to topics such as sustainability, diversity and inclusion as well as use of customer data and privacy.
Finally, after a discussion in breakout sessions, Gail stressed that culture should be the lowest acceptable behaviours and that we should always strive to do more than the bare minimum in our organisations to effectively engage the right culture to avoid a repeat of corporate scandals.
Keeping on top of it
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