Legal news and trends for Canadian in-house counsel and c-suite executives
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www.bakernet.com Mark Ellis, a Baker & McKenzie partner and author of Fiduciary Duties in Canada, says a "revolution" has taken place in the past decade in the redefinition of individual responsibility. "Senior officers and directors used to take solace in acting as a group, or on the advice of in-house or outside counsel," says Ellis. "No more. That may not be enough today. You must also be acting in the utmost good faith in the best interest of the corporation you serve. And serving the corporation today means all its stakeholders, some of whom have conflicting interests, such as shareholders and creditors who are becoming more vigilant and militant." "Regardless, there's a simple legal test: 'If it smells bad, it probably is.' That applies to the boardroom as well as the courtroom. More than ever before, board members and senior officers must heed their inner wisdom and scrupulously avoid any suggestion of acting in their self-interest." Ellis adds: "As corny as it sounds, you need a sense of righteousness." Another recent legal decision, emanating from the Bre-X scandal, is a major step in requir- ing greater care on the part of corporate offi- cials. That case involved John Felderhof, the company's chief geologist, who was acquitted of securities charges because the judge found that Felderhof had acted reasonably — exercised due diligence — in believing that his company had found gold. But, says Jull, the case estab- lished that following such due diligence now is a requirement for senior officers. "It's no longer good enough to show that you did not have mens rea to commit the offence," he adds. Baker & McKenzie has been offering compli- ance advice for more than five decades. "We're light years ahead of anyone else," says Jull who joined the firm in February 2008 after more than 20 years in private practice. A co-author of Regulatory and Corporate Liability: From Due Diligence to Risk Management, Jull says Baker & McKenzie's international reach, with some 3,600 lawyers in 70 offices in 38 coun- tries, puts it way ahead of the competition. Adds Ellis: "We're uniquely positioned as a truly global company. We can learn about a new development in China that could affect a client's operations in Markham." In the United States, one of the firm's key resources is Paul McNulty, the former US Deputy Attorney General (DAG) at the Department of Justice who oversaw several high-profile corporate fraud prosecutions before joining Baker & McKenzie last year. He authored the "McNulty Memorandum," the DOJ policy for criminally charging corporations that con- tinues to guide all federal prosecutors. He is joined by Joan Meyer, former Senior Counsel to the DAG, where she advised on policy and complex criminal litigation, including corporate fraud issues, and was instrumental in revising and implementing changes to the DOJ's corporate charging policies. For his part, Jull advocates a compliance matrix. It plots the likelihood of an event happening and the consequences of such an occurrence. "It helps a firm evaluate its exposure and assess where it is most vulnerable," he says. But whatever due diligence approach a company decides upon, there is no time like the present. "Legal work often is reactive, sometimes after the damage is done," says Jull. "My advice: 'Do it now, don't wait.' You can pay me less now, or a lot more later." ■ Corporate Compliance, Governance and Risk Management The right guidance is key to protecting you and your company Corporate Compliance is increasingly complex and global. Recent corporate scandals and the failure of risk management protocols in a number of significant enterprises have prompted governmental authorities to broaden the scope of their regulatory regimes and dramatically expand the reach of their enforcement efforts. Corporations operate under increasingly intrusive regulatory requirements, perform in a hostile law enforcement environment and answer to heightened security from shareholders and stakeholders. For multinational companies, the challenges multiply as they face inconsistent regulation and struggle to ensure that the policies and practices in place in one country do not create issues in another. Mark V. Ellis +1 416 865 6991 mark.ellis@bakernet.com Kenneth Jull +1 416 865 2309 ken.jull@bakernet.com Baker & McKenzie LLP Brookfield Place 181 Bay Street, Suite 2100 Toronto, Ontario M5J 2T3 Tel.: +1 416 863 1221 For more than 50 years, Baker & McKenzie has been effectively providing clients with global compliance and cross-disciplinary advice. Drawing on our international resources, capabilities and experience, we are able to address compliance issues in jurisdictions in which your company operates. Our unrivalled network of lawyers allows us to provide comprehensive compliance, governance and risk management services to clients around the world. Baker & McKenzie www.bakernet.com Baker & McKenzie LLP, an Ontario limited liability partnership, is a member of Baker & McKenzie International, a Swiss Verein. C ANADIAN Lawyer INHOUSE OC T OBER 2008 21