THE lack of lawyers on the boards of publicly listed companies is depriving corporate Britain of the opportunity to benefit from the profession’s sharp intelligence, according to Bill Knight, chairman of the Financial Reporting Review Panel.
“I believe a certain amount of time spent by senior practicing solicitors on outside interests while they are in practice not only fits them better for life after the firm, but also increases their effectiveness as lawyers,” he said.
However, the working habits of lawyers have evolved since the 1970s and it is now fairly rare for senior solicitors to gain external experience as non-executive directors while they are still in practice.
Today, they tend to have to have to step down from full-time practice before being able to take on such roles, the chairman said. Knight, former senior partner of Simmons & Simmons, believes there’s misconception that having a lawyer in the boardroom brings few useful skills and might be counter-productive.
He said the chairmen and chief executives he has spoken to have been negative about the mindset of lawyers, characterising them as “prepared to debate, but not prepared to agree”. He also believes such views could be undermining the credibility of the legal profession.
Michael Walker, chairman of Maclay Murray & Spens, agrees with Knight. “It is not my experience that companies are saying they don’t want to have lawyers on their boards. However, if there’s any truth in that, they are definitely missing a trick.”
Walker, who currently has no listed company directorships, has served as a non-executive director of John Menzies, Securities Trust of Scotland and two Murray venture capital trusts. “If they were just talking about having someone on the board to discuss legal issues, then I have total sympathy with such views. But a lawyer is able to offer a huge amount more than that.”
Walker highlighted lawyers’ ability to, for example, interrogate executive directors on their future strategic plans and to make use of their understanding of issues that affect people.
One reason relatively few practicing solicitors sit on corporate boards is that as law firms grew bigger, the potential for conflicts of interest increased. Also, under corporate governance rules, a non-executive director can no longer be considered “independent” if their law firm continues to do legal work for the company concerned. Also, since the 1990s there have been a number of actions against the directors of plcs at a time when law firms themselves were genuine partnerships with unlimited liability.
Until the 1980s, it was all very different. In Scotland several high-profile corporate lawyers — including Sir Tom Risk, former partner at Maclay Murray & Spens, and Sir Charles Fraser, former senior partner of W&J Burness [my father~] — combined their partnerships in leading law firms with several non-executive directorships.
Risk was a non-executive at Bank of Scotland and Standard Life while he was a partner of Maclay Murray & Spens. Sandy Stewart combined being a partner in McGrigors with non-executive roles at Scottish Amicable and Prudential.
However, subsequent generations of Scottish lawyers appear to have, with few exceptions, had to choose between continuing in full-time practice and having a string of non-executive directorships to their name. This is partly because certain firms have followed the ‘Big Four’ accountancy firms and imposed “no directorships” policies.
Some solicitors have left the law to pursue portfolio careers, such as Shonaig Macpherson. She quit McGrigors, where she was a partner, at the age of 45 in 2004 and is now chair of ITI Scotland, the National Trust for Scotland and the Scottish Council for Development and Industry. She is also a non-executive director of the Scottish Executive and Braveheart Investment.
Peter Arthur, director of headhunter Fletcher Jones, said: “The current vogue among companies looking to fill boardroom vacancies is for people with recent and relevant accountancy or investment management experience. I think it is possible that lawyers will once again become sought after, so long as they can demonstrate they have wider commercial skills.”
Perhaps lawyers have only themselves to blame for the current situation, against which Knight is currently campaigning.
This article was published in the Herald on 16 April 2007. Read this article on Herald Scotland