Biglaw, In-House Counsel, Lateral Moves, Musical Chairs, Partner Issues

Inside Straight: Don't Tell Obvious Lies!

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Okay, I confess: I made the headline intentionally provocative. You shouldn’t lie at all, and you should absolutely forbid witnesses from lying under oath. (If we, the lawyers, don’t obey the law, who will?)

I’m thinking today about a person who is not under oath and will be sorely tempted to tell an obvious lie. Don’t do that yourself, and advise others that it’s not great idea, too.

When are people tempted to tell obvious lies?

In the corporate context, a quarterly earnings announcement might boldly proclaim that the company earned $1 per share this quarter. The Street expected only 90 cents, so this appears to be great news. But there’s something else tucked into the earnings report that disappoints the analysts: revenue declined; margins compressed; organic revenue growth stalled; whatever. Thus, despite the happy headline, the stock price drops two bucks on the day of the earnings announcement.

The next week, you, or the head of your department, or the head of a business unit, or whoever, has to brief an internal audience about the quarterly results. The speaker will be sorely tempted to tell an obvious lie: He’ll pull excerpts from the slide deck used for the earnings announcement, emphasize that the company beat the Street’s consensus estimate by ten cents a share, and tell the gang that we had a great quarter.

Meanwhile, everyone in the room is thinking: “If we had such a great quarter, why did the stock price crater on the news? Do you think I’m an idiot? Why are you lying to me, and do you lie often?”

I’m no expert in corporate communications, but it strikes me that it’s a bad idea to tell obvious lies. How do you avoid telling obvious lies?

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When you prepare a presentation, think for a minute about the elephants in the room: What are the topics that your audience will plainly expect you to discuss? Include those items in your talk. If it’s necessary to admit to a failure of some type, admit it and explain what you’ll do in the future to improve things. Thus, if your stock price dropped because margins compressed, be honest: “We beat the Street by a dime a share. Despite that, the stock price dropped on the news. I don’t read minds, so I can’t guess what investors were thinking, but the most likely explanation is that analysts were unhappy with the compression in our margins. I think that’s shortsighted: Our margins were lower in Q2 because we made an investment that will improve our business over the next several years. I’d like to think the stock price dropped because we’re looking further into the future than many big investors are.” Or whatever — but don’t ignore the elephant in the room, or your audience will simply dismiss you as a liar.

Here’s another example of a tempting lie: Suppose that a corporation is moving some key business leaders (or a law firm moving practice group leaders) from San Francisco to New York. In that situation, the guys that run the joint will be sorely tempted to tell an obvious lie to the San Francisco employees: “We’re not making any operational changes. Although we’re moving a few people away, this won’t affect you at all.”

The speaker is thinking: “I’m duty-bound to calm the troops. I must tell them that nothing is changing.”

The audience is thinking: “Does this clown think I’m an idiot? Things are about to change dramatically. This guy is lying to me.”

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What’s a better way to handle this? Don’t tell obvious lies. Recognize that your audience is not stupid; instead of denying the truth, explain how you’ll deal with it: “It’s true that there will be some changes, because Smith, Jones, and Doe will no longer be here on a daily basis. But, as you know, those guys are frequently traveling anyway, and each of them has committed to be in San Francisco X days in each of the next Y years even after the move. Not only that, but we’re showering goodies on people who remain in the City by the Bay, bestowing opportunities on some people, prestige on others, fancy offices on yet others, blah, blah, blah.” The words (and truth) will vary with the situation, but the concept remains: Discuss the elephant in the room.

My last example, because I just can’t resist, is taken from the law firm environment. You see firms that are aggressively hiring lateral partners saying publicly: “We don’t buy books of business. We hire laterals only to bring the very finest lawyers into the fold.”

That’s almost always an obvious lie, and everyone who hears the statement recognizes it as a lie. There are the partners at the firm (many of whom now cry along these lines on my in-house shoulder) saying: “The managing partner just de-equitized Smith and threw Jones out of the partnership entirely. The managing partner told Smith that he’s a great lawyer, but he just doesn’t bring in enough business to justify equity status. And now we’re hiring laterals who are great lawyers, but don’t have any business? I don’t think so.”

Or, in the words of another partner with whom I spoke recently: “We’re hiring guys who don’t have any business? I sure hope we’re not that stupid!”

Don’t tell obvious lies yourself. You’re getting caught, whether you realize it or not, and you’re undermining your own credibility.

And suggest that others not tell obvious lies. When you’re advising someone who’s in a situation that will tempt him to tell an obvious lie, talk him off the ledge. There are ways of handling tough issues, and lying is probably not the best approach.

Mark Herrmann is the Vice President and Chief Counsel – Litigation at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law (affiliate link). You can reach him by email at inhouse@abovethelaw.com.

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