You’ve now landed an ideal entry-level position. In short order, the veteran lawyer you report to hands down a seemingly straightforward assignment: provide feedback on a contract. You may feel inclined to showcase your brilliance by identifying dozens of subtle legal issues. If you act on that impulse, though, here’s what your boss is likely to say: “Most of the revisions you’ve proposed pose such a remote threat that it’s not worth the effort to raise them with the business team or negotiate them with opposing counsel.” Then, perhaps after a brief pause: “To succeed in this environment, you’ll need to increase your tolerance for risk.”
That’s sound advice. The average business has little patience for in-house lawyers who place unnecessary legal obstacles in its path. But that fact sits uneasily with another aspect of the job. You still have to flag the threats that do represent a true danger. Left unchecked, risk tolerance can spiral into recklessness.
Consider what took place inside General Motors in the 2000s. During that period, the legal department settled a battery of lawsuits that centred on a similar complaint: the airbag in certain vehicles sometimes failed to deploy during a collision. According to a Harvard-led case study, “most claims were less than $100,000” and “did not require the notification or involvement” of those in leadership. The legal team “seemed content to refer the problem to engineering and wash its hands of the issue once settlements were made.” Had management known about the lawsuits, it might have launched a rigorous investigation into the defect. Instead, it took GM more than a decade to discover that millions of its cars relied on an ignition switch that randomly shut down the engine and cut the power to various safety systems—including the airbags. That led to a massive recall and a criminal inquiry into the company.
It’s possible that, until the ignition-switch revelation, GM’s legal department never doubted the wisdom of its conduct. After all, a risk-tolerant lawyer is supposed to handle relatively inexpensive matters without disturbing the top brass. Even the Harvard case study interprets the fiasco not as “a black-and-white morality tale” but as an illustration of how tricky it is for corporate counsel to balance “business with the law.” All of which raises a delicate question: what sort of in-house legal issues demand attention?
For a partial answer, let’s return to the task of contract review. Perhaps your boss has asked you, a humble counsel, to look over a raft of edits that a customer has inserted into a purchase agreement. You promptly notice a new clause that would compel the company to respond to technical-support inquiries within 24 hours. That language gives you pause: the technical team is too short-staffed to reply at such speed. Should you insist on a longer maximum response time, knowing that you’ll slow down the deal? Absolutely. When a company makes a promise it can’t keep—no matter how trivial the promise might seem—it opens itself up to disputes and irritated customers. Your boss will be happy to sidestep those outcomes.
It’s also useful to stay plugged into the rhythms of your industry. If you work at an investment fund, study the news coverage of the financial sector. By reading about the legal troubles of your competitors, you can help your employer avoid the same pitfalls. If you work at a publicly traded corporation—such as a bank or insurance company—pay attention to the robust disclosures that it issues to shareholders. Those documents will outline potential threats to the business, which you can stay alert to in your daily work.
Perhaps you’ll one day spot a major problem, like the alarming string of lawsuits that GM’s legal team neglected to take to management. It might be tempting, especially if you work in an environment that prizes risk tolerance, to sugarcoat the truth or pretend that the matter isn’t serious. But you must find the courage to share your concern with someone who has the power to take action. Even if that means bursting into the office of the CEO.