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| Any one of its agents is charged with protecting the principal’s interests, but two overriding considerations will inevitably take priority: (i) their wish to protect and perpetuate their own role ''as'' agent, and its accompanying income stream — their need to ''persuade the principal that their role is needed'' whether or not it ''is'' needed — no turkey votes for Christmas; and (ii) their wish to not ''fuck up'' — to demonstrate that not only is the role necessary but ''I am the best person to carry out that role''. | | Any one of its agents is charged with protecting the principal’s interests, but two overriding considerations will inevitably take priority: (i) their wish to protect and perpetuate their own role ''as'' agent, and its accompanying income stream — their need to ''persuade the principal that their role is needed'' whether or not it ''is'' needed — no turkey votes for Christmas; and (ii) their wish to not ''fuck up'' — to demonstrate that not only is the role necessary but ''I am the best person to carry out that role''. |
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| ==Big law and the agency problem== | | ==Big law and the agency problem== |
| Just one can make the case that humans did not domesticate wheat so much as wheat domesticated humans,<ref>A {{author|Yuval Noah Harari}} ''bon mot'' that owes something to {{author|Richard Dawkins}}’ idea of the [[extended phenotype]], we feel.</ref> so might one argue that [[investment bank]]s did not cultivate [[big law]] firms as much as [[big law]] — oh, okay, and [[big consultancy]] — cultivated the investment banks. Our [[IB GC genealogy]] refers.
| | {{Who domesticated whom}} |
| | | ==Scale== |
| For there are certain pillars of bank activity — the conduct of [[litigation]] being one, the execution corporate advisory business another and let us throw in the wheel-spinning “industry” of [[industry associations]] for a third — whose conduct so depends upon, and is in thrall to, the memetic interests and commercial imperatives of law firms, to the outright detriment of anyone else involved, that it is hard to rationalise these activities other than as some kind of extended phenotype for private practice of commercial law.
| | Another “tell” is for the size of money at stake to be so large that even a legal bill in the tens of millions will amount to a rounding error. |
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| In this view, the in-house [[legal department]] — a bank function all but unknown thirty years ago, but now so monstrous that it needs its own chief operating officer<ref>our [[history of inhouse legal]] refers.</ref> — really only exists to make life as easy as possible for the law firms to optimise recovery of recorded chargeable time.
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| [[Big law]]’s neat evolutionary trick big here is to ''weaponise'' the [[agency problem]]. It does this by imposing structural intermediation between those who instruct the lawyers, and those who ultimately pay for them.
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| In an organisation big enough to have its own legal function this is straightforward enough to describe. The decision to instruct a law firm (a corporate agent) — what it is required to do and how much it should be paid for doing it — is handled by the legal department (staffed by human agents), but paid for, ultimately, by shareholders. If the legal department is evaluated for the quality of its counsel management at all, it will be impressionistically, and its performance is unlikely be reflected in the Christmas bonus.<ref>Trading, another human agent, may complain about the legal bills’ impacting on her PN and therefore ''her'' Christmas bonus, but it won’t be an item on the agenda at the AGM.</ref>
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| But in bigger organisations this disintermediation becomes ever more baroque. Once a firm appoints a bank to advise it, all bets, and controls, are off. Here is the scenario:
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| {{Quote|''Corporation, represented by its legal department (human agents) — appoints its own law firm (a corporate agent),<ref>Once upon a time there was no corporate agency here and individual professional advisers had unlimited personal liability. Just imagine!</ref> but also an advisory bank (a corporate agent), itself represented by its legal department (human agents), who appoints its own law firm (another corporate agent) itself represented by its staff (human agents) — to advise on a transaction between the first corporation and another corporation, similarly represented.}}
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| There arises therefore a delicate chain of agencies — six would be standard in the simplest bilateral transaction — between those who ''instruct'' the firms and those who are, ultimately, expected to ''pay'' for the services rendered. By design, none of the intermediaries — agents — have personal [[skin in the game|skin]] in the [[infinite game]] and have only one conflicting interest: to ''keep playing''.<ref>See {{author|James P. Carse}}’s {{br|Finite and Infinite Games}}.</ref> But it is a powerful interest indeed.
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| A second “tell” is for the size of money at stake to be so large that even a legal bill in the tens of millions will amount to a rounding error.
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| So, to take our three examples: | | So, to take our three examples: |