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Corporate Culture – Why Is It So Important?

By December 5, 2023December 11th, 2023No Comments


A strong corporate culture has long been regarded by risk managers as a vitally important organisational asset. Over the last few years, we have seen workplace culture rise to prominence as a critical boardroom issue for law firms.

The board must play its part in shaping the ethical climate of an organisation. We know the concept of, “tone at the top”, is used to describe the principles of an organisation. Senior management act as ambassadors for a firm’s risk and compliance culture. The methodology is clear enough, if those in a leadership position adopt high standards in the workplace, this should provide a strong foundation of good behaviour and result in fewer employees engaging in unethical conduct.

The pandemic was a significant factor in shifting attitudes to workplace culture, stretching the sense of connection and affiliation amongst colleagues. Bad workplace behaviour, that may previously have gone unchallenged and possibly unnoticed by others, either receded with the lack of physical contact in the office, or in some cases, became more apparent online and required tackling. Firms found they were having to address new topics such as colleague interaction, communication styles, and employee wellbeing.


Lawyers have witnessed the recurring themes of bullying, harassment, and sexual misconduct in the profession over recent years. This provides further evidence of the damaging effect of cultural failings in law firms. High profile cases have played out publicly and as a result, certain lawyers’ names have become well-known within the legal community and beyond, synonymous with poor ethical behaviour and/or toxic culture.

Responding proactively to these issues can head off unwanted bad behaviour and will ensure a values-based and inclusive culture that is risk oriented, employee-centric and strategy focused. A robust culture should, after all, be something that every organisation aspires to for the manifold benefits it brings. However, we know that behavioural issues and upskilling in these areas can often get sidelined, with the single-minded intent required by busy lawyers to get through a long day’s work and be as “successful” as they can. For many city law firms, promotion and reward are typically founded in client acquisition and revenue. Strong messaging is therefore required by law firms to ensure that behaviour remains aligned to values. This goes to the heart of a firm’s culture.


The way we treat bullying and harassment at work has changed significantly in recent years, largely attributed to the success of the #MeToo movement.

The SRA had been encountering allegations by junior lawyers of toxic workplace environments for several years in its regulatory and enforcement work. It wanted to stem and turn the tide on poor ethical behaviour in law firms. In April 2023, the SRA brought into force rule changes to the SRA Codes of Conduct in respect of workplace culture.

The SRA had previously engaged with the profession on a Workplace Culture Thematic Review, and it had issued warning notices and guidance setting out its expectations on workplace behaviour. Now, there is an explicit regulatory obligation on solicitors to treat colleagues fairly and with respect; not to bully, harass, or discriminate unfairly against them. There is also a requirement in the Code of Conduct for Solicitors, for managers (i.e. the partners) to “challenge behaviour” that does not meet the SRA’s required standard. In the updated Code of Conduct for Firms, the corresponding expectation is that “you require your employees to meet this standard”.

The “challenging behaviours” part of the Code is proving the most testing. Most law firm managers want to do the right thing, but they are unclear about the best way to roll out a consistent message to their partners. After all, law firms inherently comprise a group of highly intelligent individuals, each with their own unique skills and style of working, and probably their own ideas about how to manage people.

Some of the difficulties are highlighted by the issues addressed in the Dominic Raab case, where Adam Tolley, KC identified in his report that “legitimate, reasonable and constructive criticism” is capable of being regarded as intimidatory. Is there a right or wrong way to provide constructive feedback? What does “learning on the job” look and sound like at your firm? At what point might a manager overstep the mark? Answering these questions might lead to a discussion about the resilience of lawyers at different stages of their career and how their varying needs can impact workplace culture. Law firms must stay current and move with the times and this includes embracing views from all parts of the workplace community.

The SRA has issued updated guidance to the profession to help lawyers understand the new obligations and how to comply with them. In the guidance the SRA is clear that those it regulates should not support a working environment which risks mistakes and poor outcomes for clients or serious ethical concerns. The SRA requires regulated firms to provide a safe environment for people to raise concerns, which will be dealt with constructively, and to put in place effective governance structures, arrangements, systems, and controls around these aspects.


In responding to the new regulatory obligations, a holistic, wide-ranging, approach is recommended. This should be led by relevant stakeholders, including HR, which should be a vital partner to the risk team, when engaging on this topic.

Training, especially on the challenging behaviours obligation, could serve as a useful prompt for internal group discussion, the output of which could feed into the drafting or reworking of appropriate policies and procedures. It does not seem unrealistic to predict that this current focus on workplace culture, behaviour, and a requirement to speak out in the event of unfair treatment, could act as a catalyst for employment claims against a law firm.

Law firms are prepared for more issues to come to light, whether they are employment law-related allegations routed to HR, or issues that might fall more appropriately within scope of the new regulatory requirements. The SRA and SDT are said to be braced for an eventual upsurge in claims resulting from these new regulatory obligations.

In addition to reviewing governance structures, systems, and controls, and developing the right workplace culture and environment for the delivery of competent and ethical legal services to clients, law firms might also want to consider a risk transfer solution when contemplating the potential risk of increased employment practices claims.


Employment Practices Liability insurance (EPL) is an insurance solution, which in the past might have been more typically associated with claims in the US. Recently, however, we have observed EPL claims arising globally, certainly in Europe and in the UK. Notably, some of these claims have been settled rapidly, in some cases, in a matter of days. The sums are significant, high seven and in some cases eight figure numbers.

EPL protects businesses against claims made by their employees when they believe their legal rights have been violated. It covers employers against various employee claims such as wrongful termination, sexual harassment, and discrimination.

Cases we have seen recently have involved age discrimination, Equal Pay Act claims, sexual harassment claims and toxic workplace behaviour. Often purchased alongside EPL, Management Liability Insurance (ML) is designed to protect directors, senior managers, and other key employees against the costs of personal liability. This can be for compensatory damages and/or defence costs arising from actions and decisions they take on behalf of the firm. It includes costs associated with a regulatory investigation, and it is in this regard where we have seen an uptick in interest from law firms over recent years.

Although law firm cases may start life as an EPL notification, EPL claims frequently include allegations against board members, heads of function and those undertaking managerial responsibility. This is due to a failure in enforcing an adequate work environment and therefore not controlling or managing the firm in a way that gives the employee protection. These types of allegations can trigger the ML coverage and indeed the potential for parallel regulatory investigations, which themselves would present the prospect of an ML notification. It is in this regard that we can see scope for increased claims against the management of a firm arising from the new regulatory obligations. This also highlights the need for consideration to be given to having a blended ML/EPL policy, given the likelihood of crossover claims between the coverages.

It is important, when addressing the procurement of ML/EPL coverage, that serious thought be given to the selection of the insurance partner. Given the reputational exposure that presents itself in the wake of an EPL claim, it is of paramount importance that the claims handling capability of an insurance partner, whether broker or insurer, be demonstrated. The right partner should be ready and able to stand shoulder to shoulder with the firm in the most trying of circumstances and based on their experience, offer wise counsel during the negotiation of any ensuing settlement.

Paragon International Insurance Brokers Ltd would be happy to assist with information about how EPL and ML insurance products may respond, as well as assist you in navigating the SRA Code of Conduct changes and implementing any necessary risk management changes in your firm.


If you would like to discuss any of the issues arising from this article, please contact:

Jane Hunter


T +44 (0)204 525 6522

Bradleigh Barker

T +44 (0)20 7280 8237