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Agency problem: Difference between revisions
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This puts our old friend the [[drills and holes]] conundrum into perspective: it is true that a corporation desires quick, cheap and effective legal services. In many cases, it does not need ''any'' legal services ''at all'' — it could do not just with legal protections delivered in a convenient format and by a less expensive source, but ''no legal protections at all''. What percentage of legal agreements are ever litigated? But it is hard for an inanimate pile of papers filed at companies registry to have that sort of insight. It relies on its agents to arrive at that conclusion on its behalf. But who, amongst the byzantine control structure that those very agents have constructed to help it make decisions of that sort — its [[inhouse counsel]], [[outhouse counsel]], credit risk management, document [[negotiators]], client [[onboarding]] team, [[compliance]] or [[internal audit]] — who of these people would ever say that? And even if one did, would {{sex|he}} not be shut down by the consensus of the others?<ref>Those who don’t believe me should try proposing that you don’t need [[cross default]] in trading agreements. You will get bilateral consensus on this, in private conversations, from almost everyone; no-one will say it in public.</ref> | This puts our old friend the [[drills and holes]] conundrum into perspective: it is true that a corporation desires quick, cheap and effective legal services. In many cases, it does not need ''any'' legal services ''at all'' — it could do not just with legal protections delivered in a convenient format and by a less expensive source, but ''no legal protections at all''. What percentage of legal agreements are ever litigated? But it is hard for an inanimate pile of papers filed at companies registry to have that sort of insight. It relies on its agents to arrive at that conclusion on its behalf. But who, amongst the byzantine control structure that those very agents have constructed to help it make decisions of that sort — its [[inhouse counsel]], [[outhouse counsel]], credit risk management, document [[negotiators]], client [[onboarding]] team, [[compliance]] or [[internal audit]] — who of these people would ever say that? And even if one did, would {{sex|he}} not be shut down by the consensus of the others?<ref>Those who don’t believe me should try proposing that you don’t need [[cross default]] in trading agreements. You will get bilateral consensus on this, in private conversations, from almost everyone; no-one will say it in public.</ref> | ||
===Big law and the agency problem=== | |||
Just as humans did not domesticate wheat so much as wheat domesticated humans, a good case can be made that investment banks did not cultivate big law as much as big law — oh, okay, and big consultancy — cultivated the banks. Our [[IB GC genealogy]] refers. | |||
There are certain pillars of bank activity — the conduct of litigation and the corporate advisory business for clear examples, and the existence of [[industry associations]] is another— that are so dependent on , and in thrall to, the commercial imperatives of the law firm and not client that the in-house legal department’s job is really to make life as easy as possible for the law firms to recover their recorded chargeable time. | |||
{{Sa}} | {{Sa}} | ||
*[[Stakeholder capitalism]] | *[[Stakeholder capitalism]] | ||