Another week, another crisis.
I launched this series on leadership through crisis a week ago, unaware that the week would throw up yet another crisis here in the UK.
On Friday, the UK Finance Minister (we call our Finance Minister the ‘Chancellor of the Exchequer’ – our Prime Minister is also our ‘First Lord of the Treasury’ – we like to preserve the ancient here in the UK, as if this will help us weather the storms of more modern times) held what was described as a ‘fiscal event’. It was described as a fiscal event to distinguish it from a full budget, partly because the measures announced hadn’t been costed independently by the UK Office of Budget Responsibility, as is customary for a full budget.
It might as well have been described as a ‘fiscal bombshell’ or a ‘fiscal disaster’. At a time when the economy was already shaky post-pandemic – and with inflation riding at around 10 per cent – the Chancellor issued a range of tax-cutting measures, including reducing the top rate of income tax from 45% to 40%.
The markets reacted immediately, and with vigour. The measures were perceived as inflationary, such that it was inevitable that interest rates would have to rise. The pound took a nose-dive, at one point reaching near parity with the dollar. The Bank of England was forced to intervene, pledging to buy up vast quantities of Government debt. And the International Monetary Fund expressed its concern at the wisdom of the Government’s measures.
The domestic mortgage market is in turmoil, with lenders withdrawing around 40% of mortgage products in the days following the ‘event’. And interest rates on domestic mortgages have shot up, many of them doubling.
Today the Chancellor has done a U turn, dropping the proposed cutting of the top rate of tax, and the pound has strengthened slightly against the dollar.
So more of an example of crisis creation or crisis exacerbation than a lesson in crisis management.
In this issue David Moskowitz, a former DGC at Wells Fargo (one of the world’s largest banks by market capitalisation) shares his views on leadership through crisis. And we’ll have the views of another GC in the next issue of Practical Counsel.
As always, please comment and contribute to the debate by posting direct on Practical Counsel. Also, please write in with your unique people issues to me (practicalcounsel@substack.com) - I unequivocally undertake never to reveal your identity and will change key details of your situation so as to preserve your confidentiality and anonymity (unless you don’t want this). I also undertake to write to you personally with my own thoughts and comments on your situation and am always happy to follow up with a call on Zoom or similar.
Things I Didn’t Learn in Law School About Leading Through a Crisis by David Moskowitz
David Moskowitz is a former Deputy General Counsel and EVP of Wells Fargo where he led the Legal Department’s Consumer Lending Division. He also served Wells Fargo as Head of Government Relations & Public Policy.
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“In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” — Theodore Roosevelt, 26th U.S. president
Our lives are roller-coaster rides filled with an almost endless array of unpredictable experiences. Ranging from sublimely happy moments to crushingly painful disappointments, life teaches us the skills to weather almost every kind of event, no matter how inconceivable it may be. In my experience as a senior attorney at a multi-national corporation, I learned that corporations can suffer from the same mental illnesses that individuals suffer from: they can be paranoid, neurotic, bi-polar, delusional, and borderline. And at times of crisis, these weaknesses can be magnified. Lawyers must think beyond their legal training to be a dependable source of leadership during a crisis. In many ways, they are the corporation’s psychiatrist when the chips are on the table.
Despite the existence of the most thorough and comprehensive crisis management plan, corporations can still lose their way when the unexpected occurs. Crises don’t fit cookie-cutter descriptions. They can be economic, legal, regulatory, business, personnel, or personal in nature. No boilerplate crisis management plan can cover every scenario, but a prepared in-house attorney can guide their corporation to a safe landing.
Lawyers tend to behave like lawyers, which means that during crises, they sometimes rely exclusively on their years of experience and their training and elevate the importance of “pure” legal advice. While this is frequently the right approach during a purely legal crisis (think litigation), it may, conversely, exacerbate a crisis situation that is not purely legal in nature. Not every crisis responds well to a pure legal strategy. Most crises raise challenges on multiple, non-legal fronts, that can conflict with legal advice that is typically risk averse. These include crises with public relations, reputational, political, and personal components. Let’s recognize that most crises are not exclusively legal in nature. Most of our “crisis clients” are being bombarded by issues on multiple fronts.
For senior in-house counsel, being perceived as a reliable source of advice during moments of crisis is not something that happens overnight. It is an accumulation of countless smaller experiences that collectively build trust over a period of time and that come to fruition at times of crisis.
Here are some approaches that in-house counsel can develop over time that can help weather a crisis storm.
1. Managing corporate clients and leadership. Corporate clients and board members need the truth from their lawyers. They may generally want their lawyers to support their decisions and conclusions, but they do not benefit from sycophancy. Over time, an accumulation of good experiences with their lawyers will help clients rely on their more general advice. Corporate clients appreciate lawyers who are transparent and proactive. They lean on lawyers who provide information early in an information cycle, especially when it is accompanied by thoughtful advice. Pro Tip: Being honest and proactive does not mean being rude and unprofessional. Delivering advice in a way that is consistent with the client’s preferred communication style will likely result in clients who are more likely to rely on tough advice during a time of crisis.
2. Legal advice should incorporate risk perspectives beyond “pure” legal risk. This does not mean in-house counsel should cross the line and provide business advice. Instead, legal advice should incorporate downstream legal risks that can emerge from political, public relations, and economic risk factors. Many of tomorrow’s legal risks and expenses are the product of today’s non-legal risks.
3. Develop influence with non-legal corporate partners. Develop transparent relationships with your corporation’s communicators, risk professionals, auditors, finance team, government relations professionals, board members, business leaders, and policy experts. Be willing to speak on background (without violating any attorney-client privileges) with trusted members of the media, especially when doing so will lower risk in the long term. Help corporate partners understand the big picture that is emerging during a time of crisis.
4. Develop influence with external parties. Spend time developing your general reputation as a thoughtful source of expertise and advice. These external parties can include regulators, trade group leaders, conference attendees, seminar participants, media influencers, and others. You would be surprised at how impactful a casual meeting “for coffee” can be. People tend to rely on people who they have a relationship with. Always pay it forward.
5. Develop a style that is effective at times of crisis and that increases influence in general. When the stress level of a crisis is at its peak, corporate clients gravitate towards lawyers who exude a sense of calm. Similarly, they tend to avoid advisors who exacerbate a sense of panic and confusion. It is important for you to be sensitive to the “mental state” of your corporate clients and to react accordingly. Be transparent, serene, confident, thoughtful, measured, and (if you have one) use a tailored sense of humor to diffuse tension at key moments.
Crises are like hurricanes. They arrive relatively quickly, they can cause an enormous amount of damage and destruction, and they can take time to recover from. But as in-house counsel, you can help mitigate the damage and help guide your clients to a safer future. The more skills you bring to the table beyond the “pure” legal, the better.
Comment from Jonathan
David Moskowitz makes a number of excellent points in his piece on leadership through crisis. I want to highlight one of them, briefly.
David makes the point that, in his experience, corporations can suffer from the same mental illnesses that individuals suffer from. And he views the senior in-house lawyer as, in many ways, being the corporation’s psychiatrist when the chips are down.
This is a really interesting insight and one I’d agree with. All lawyers can benefit, in my view, from a basic (or ideally a better than basic) understanding of psychology.
Leaders, in my view, need to up their psychological understanding, and this applies both in relation to self-understanding / self-awareness, understanding of others (as individuals) and understanding of the organisation, at a structural and systemic level.
Organisations are complex organisms. Large corporations are highly complex and consist of multiple systems. Senior leaders need to understand both the politics and the psychology of these systems – both when business is ‘as usual’, but in particular when there is a crisis.
David is right that the organisation can suffer from mental ill-health in very similar ways that an individual suffers from mental ill-health. But it is also possible that individual systems within the organisation are suffering and that, for example, one department is experiencing some form of neurosis, while another department is acting in a way that might be described as bi-polar.
The skilful GC / CLO / senior in-house lawyer will have a rounded understanding of the systems in which he or she operates. In times of crisis there are likely to be elevated sensitivities and vulnerabilities – advice to the Board, for example, will be far more effective if the lawyer understands the psychology of the Board, both in terms of the individuals on the Board and the dynamic of the Board as a whole.
Some in-house lawyers have an incredibly well-developed intuitive ‘read’ when it comes to their key stakeholders.
Most, in my experience, need to work at developing a finer tuned understanding of their key stakeholders and how best to interact with them – a skill which becomes particularly important in times of crisis.
Key Takeaways
1. This is the second in a series of issues about leadership through crisis.
2. In the first issue, Jonathan introduced the series and shared some initial thoughts about the best ways for senior in-house lawyers to show leadership during a crisis.
3. In this issue, David Moskowitz, an ex-DGC of Wells Fargo shares his views. He emphasises the critical importance of managing key internal relationships and relationships with the Board.
4. Legal advice should incorporate risk perspectives beyond pure legal risk – for example downstream legal risks that can emerge from other factors such as political factors or PR factors.
5. The senior in-house lawyer should develop influence with both non-legal corporate partners, but also key external parties, and nurture a style that is effective in times of crisis.
6. The organisation is susceptible to ill-health (including mental ill-health) in the same way that an individual is. The senior in-house lawyer will be most effective if he or she understands the systems in which he or she operates, and how to influence those systems.
And now …….
Contribute to the debate and write in with your comments and observations. Also write to Jonathan with any other people issues you face as an in-house lawyer.
Jonathan can be reached by email at practicalcounsel@substack.com
A note for you picky lawyers; and a plea for tolerance
I am a British lawyer by background and went to both school and University in the UK. So my English is British English. I have taken a conscious decision to write this newsletter in British English, but to try to avoid phrases that aren’t common outside the UK. Sometimes, though, I’ll use a phrase that isn’t commonly used outside the UK, without realising that it is a Britishism. I also endeavour to use the vernacular spellings of my contributors (e.g. to use US spellings for a US contributor), but won’t always get this right.
My plea is for you to tolerate the British spellings and grammar and the occasional Britishism. And to focus on the substance of the newsletter rather than the occasional (to you) annoying turn of phrase, bit of grammar or unorthodox spelling, or the occasional inconsistency in spelling as between, for example, UK and US ‘standard’ spellings.
Thank you and best wishes,
Jonathan Middleburgh