The Invisible Asset: How the Rule of Law Drives Ethical Corporate Value

In this session of the Dean’s Distinguished Speaker Series, Professor Robert C. Bird, Professor of Business Law and Eversource Energy Chair in Business Ethics, showed how legal knowledge can be a powerful (but as yet, still very much underused) source of competitive advantage. Moving beyond the view of legal knowledge as being for purely protective or reactive purposes, he outlined five pathways of legal strategy that managers can adopt when responding to the environment in which their businesses operate. Some offer only modest benefit, while others enable firms to weave legal insight into core decision-making, strengthen compliance culture, and create lasting strategic value. Drawing on his book  ‘Legal Knowledge in Organisations: A Source of Strategic and Competitive Advantage’ (Cambridge University Press), he explained how organisations can move step by step from basic legal awareness to a fully integrating legal knowledge into business strategy.

Professor Bird highlighted that building a strong culture of legal knowledge is a gradual process. Through practical examples, he described how leaders can embed legal thinking across business units, align legal and commercial goals, and develop managers who can recognise and use legal opportunities rather than simply avoid risk. The session was moderated by Dr Genie Sugene Gan, Singapore Digital Leader at IMDA, who linked these ideas to Singapore’s fast-changing digital and regulatory landscape and stressed the need to treat legal strategy as a core element of governance and long-term value creation.

The following is an edited transcript of the Q&A segment:

Dr. Genie: I thought that was a fascinating lecture. It was peppered with a lot of jokes, and I really enjoyed it. What really struck me most from the presentation was the idea that legal knowledge becomes strategic only when it's embedded throughout the organisation, not just confined to the legal department. In my experience working with boards, policymakers and business leaders, that shift is often the hardest one to make.

To start off this segment, I want to focus a little bit on the ‘how’. Many organisations still view law primarily as a defensive mechanism, something to avoid getting wrong, like you've described. From your research, what traits should organisations encourage to help evolve legal knowledge from a check-in-the-box mindset to a strategic capability?

Prof. Bird: A great question. It's not an easy path. It takes time, but it's worth doing. Here are some things that firms can do, and especially lawyers can do, to become strategic partners in the organisation. For many lawyers and compliance experts, executives are not going to come knocking on their door and say, would you like to be a strategic partner? We view your strategic value completely and fully. It is the lawyers that are going to have to do the work.

What lawyers need to do is to code‑switch. When a speaker speaks in the language of their audience, using the terms and the assumptions that the audience expects, that's how you explain your concept in their terms. I am a lawyer in a business school. I am surrounded not by fellow law professors, but by marketers, financiers, operations experts, accountants of all stripes. I have learned to speak their language.

So a lawyer, when speaking to finance professionals, needs to talk in their language, whether it's referring to the company as the firm, which they generally use, looking at firm metrics, stocks, profit, return on assets, return on equity, etc., knowing those variables that are valuable to them, understanding how these professionals will value profit maximisation and showing how legal knowledge can help meet those goals. When I talk to management faculty or people that are involved in managing the organisation directly, I talk about the organisation rather than the firm, because that's the lexicon that sometimes these individuals use. I talk about strategy. I talk about culture. I talk about maximising organisational potential and organisational citizenship because that is the language that they speak.

Lawyers have to come to business people and be willing to lean in, to listen to what they want, understand what their goals are, and ask how they can help. So, code‑switching is key. How do you do this? You learn their language and speak it. You also find allies. Allies are important in every organisation. Lawyers are going to find some allies that are not ones that have legal degrees. You find them. They're going to help you in that quest. They will help you maintain some connectivity with other parts of the organisation.

Your goal is not to convince everyone in every organisation or every business school. You will have naysayers that firmly say no to the importance of law because they think it is not valuable. What you want to do is persuade enough so that you can move the needle and show your value over time. It is all about your audience.

Now, there's one risk to this that every lawyer should know. Leaning into organisations never means abandoning your fundamental responsibility to the organisation. Lawyers should never let themselves be captured by their business colleagues. You never forget your obligations to the firm. Never forget your respect to the rule of law. Because if lawyers go too far, then they become just another entrepreneur in the company and legal protections are forgotten. That's a risk that can happen.

It's the idea of trying to lean so far forward into other people that you lose your essential values. Don't do that. But it's that code‑switching, it's that listening, showing your value from their perspective over time and doing it in a language they can understand. You do that, you're going to find some allies on your side.

Dr. Genie: And you know what, I'm allowed to make this self‑deprecating joke because I'm a lawyer. I can say that. I'm allowed to laugh at myself.

Prof. Bird: You absolutely are. And you raised an important point. When you think of the top C‑suite executives in the firm, they're usually called chief financial officer, chief executive officer, chief operations officer. The term chief legal officer is relatively new. What did we generally call them? General counsel, corporate counsel, in‑house counsel. What are lawyers? Lawyers are counsellors.

The lawyer is the person the CEO calls at 11:00 at night when he is sitting at the edge of his bed, or she is sitting at the edge of the bed going, what do I do with this difficult problem? Lawyers are the ones that executives turn to when they need to speak to someone in confidence and someone with integrity. That is a valuable asset to firms that is difficult to measure.

ChatGPT is never going to be able to do that because it's a human connection that executive needs. AI cannot be that shoulder to cry on or that person to confide in. That's what we lawyers do. We are counsellors first and foremost, and that is an asset that is irreplaceable and valuable to firms.

Dr. Genie: Very well expressed. I couldn't imagine otherwise. I have a next question for you. We have some insights into the profile of people who have signed up for tonight's lecture, and I think we've got some senior leaders in the audience. I want to frame this next question more for them.

Your lecture connects legal knowledge to ethical corporate value, and that's a big word, ethics. What practical steps can leadership teams take to ensure that legal strategy genuinely strengthens ethical decision‑making across the organisation? And to merge that with one of the questions from the floor: is ethical decision‑making even still relevant in today's environment?

Prof. Bird: Obviously, the second one is vitally important, but let me look at the first one. How do you instil ethical values in an organisation? If you're a CEO and you're going to look to make sure these values are well embedded, you are going to look to the culture‑keepers in your organisations. Quite often that's your lawyer, that's your compliance professional, that's your risk manager. It's people that understand the importance of values and getting them on board and saying, what are our values and how can we articulate them?

Ethics is something that is difficult to create and easy to lose. Corporate social responsibility, authentic CSR, not greenwashing, takes time to articulate and build. It is essential for the organisation to have, because without a compass that is based upon values, an organisation can falter. Once an organisation loses its mission, which can be respect for ethics, it can be building a product of extremely high quality because it believes in the product, not because of value maximisation, having an obligation to society through corporate social responsibility, respecting the human rights of others, these are essential traits that businesses must have because an ethical company helps support an ethical society.

Free markets require society to function. Free markets require education. They require transportation. They require clean government, and they require the rule of law. A lot of things that I think over the years Singapore has actually done very well and something that maybe the United States wants to take a lesson from.

Let me talk about the next part of the question: is ethics really worth it right now with all that's happening? There's a major war already happening in the Middle East. Markets are becoming more and more volatile. The price of oil is rising. Companies are asking, diversity, equity and inclusion, the rule of law, these things that we should even consider.

Global instability today and what we're seeing in today's financial markets and on the global stage is no greater evidence for the importance of social responsibility than that. If we see what happens when the rule of law is ignored, the rule of law was fading fast when I wrote about it, and it still is. And that's bad for business.

When the rule of law is eroded, people die. When the rule of law is eroded, markets convulse. When companies don't behave ethically, free markets atrophy. All businesses have a responsibility to sustain ethical and free and fair trade, not simply for the short‑term value added of shareholder price, but for the long‑term good of society. A strong society allows for strong markets. Firms that are committed to social responsibility support that society, which allows a free market to thrive.

When you see the world around you seeming to be more chaotic or more frustrating, or it doesn't appear the way you want it to, I humbly recommend: don't curse the darkness, light a candle. Be the change you want to be. Be the source of ethical values in your organisation, whether it's in academia or in your professional life. Together, each one of us can make a difference in a highly important way. If we each light a candle and there's a thousand candles, we'll have a bright light that changes the world.

Dr. Genie: I think that was well said. It's aspirational, but it also gives us a glimmer of hope that it's possible, and we should all work towards that. That dovetails into our next question from somebody in the audience who asked: how do people working in organisations address the tension between business reality and business decisions against legal determinations? There’s often that tension, which is why lawyers are usually labelled as the showstoppers and the wet blankets. How do we balance that tension? Theoretically we know this, but I want to drill down on the how.

Prof. Bird: How do you make it happen? This is in addition to what I mentioned about using code‑switching and trying to encourage lawyers. Lawyers and managers have to work together. Managers have an obligation too. They need to set aside some of their predispositions about lawyers as impediments to corporate value and listen to what lawyers have to say. Lawyers have to set aside their inherent reaction, that reflex of no, and take the time to really understand the business and the perspectives of one another.

What it really takes at a granular level is individual perspective‑taking. It's one‑on‑one meetings between lawyer and manager, between compliance professional and executive, across the firm and over time on specific granular issues. Think about a beach. As beautiful as it is, what is a beach made of? Millions of tiny grains of sand. So is an organisation the result of millions of tiny decisions made over time. Every positive encounter between lawyer and manager is another grain of sand on the beach that helps build an environment that matters.

So there's this gradual building over time, and as it happens, you build momentum and then you start to build culture. But each side has a responsibility to lean in. There's also an additional need as well. There are a number of American business schools that graduate undergraduate students and MBAs without a single required course in the legal environment of business.

These smart MBAs with high salaries and the golden passport to luxury, what do they wind up with? They don't know how to read a contract. We don't know if they can hire and fire someone, interpret environmental regulations, prevent insider trading, navigate the day‑to‑day world of compliance and administrative law. The only legal knowledge that they might have is from watching Netflix. And yet they're hired with great regularity. Such individuals that lack legal education are human ticking time bombs just waiting to go off to harm the organisation's liability.

If I'm hiring talent in the organisation, I want to know if they can process data well, if they can use AI, if they're a good accountant, all the talents that make an organisation work. But I also want to ask them, did you get any legal training? Did you get any ethical training? What did you get out of it? What can you bring to the organisation about your legal and ethical knowledge? It only takes a couple of minutes.

If you have a smart candidate that understands how to run regressions and is brilliant analytically, but if you ask them about the law, they get that deer‑in‑the‑headlights look, like they don't understand what the question is, that's a problem. That may not be someone you want to hire. Schools need to educate legally astute managers, because the legally astute managers of today will become the legally astute managers of tomorrow and will become the ethical leaders of future generations.

Dr. Genie: You were talking about code‑switching and that is something that lawyers in organisations need to remember, to try to make friends and get buy‑in from stakeholders internally. But on the other side, business managers often do not engage the lawyers in deals, negotiations and customer interactions early enough. My observation is that you only call in the lawyer when there's a problem already, a potential breach of contract or a variation of contracts, and then you call in the lawyer. Maybe a word of advice for business managers is to try to be more collaborative.

Prof. Bird: You're asking all the right questions. Do you really want to bring a lawyer in when the concrete of decision‑making has occurred? Managers need to lean in. Some studies have shown, and this is not conclusive, that when students begin their MBA programme, they have a certain level of ethics and corporate social responsibility that's inherent to them from their families, from their faith, from their environment. When they graduate, those levels of ethical beliefs and standards go down. They transform from being ethical citizens to worshippers of the maximisation of shareholder value to the exclusion of almost anything else. Not every student is like that, of course, but business schools untethered can do that.

If you come in with a certain set of training that only looks at shareholder value as the full and final goal, it's time to shed some of those assumptions and lean into those around you that are your partners in your organisations. So I ask managers: if you want to see if your lawyers are involved, work with them on matters that are relatively less controversial, deals that aren't firm‑changing, and start to gradually build trust. It's the incremental change that is successful.

I learned early on as a junior professor in a business school that going knocking on someone's door and saying, legal knowledge is really important, you need to have more legal courses, doesn't get you anywhere, because then the door is politely closed in your face. But gradually over time, if you show the importance of value, you start from relatively uncontroversial perspectives, you build value over time. Good managers will listen and they will come to you.

I remember one day a faculty member entered my office and asked me about legal knowledge as a source of value. My heart leapt. I was thrilled. It was an unprompted query some years ago, and what I really wanted to say was, where have you been? I didn't. Instead, I said, thank you so much for coming by. That is a great idea you had about law and strategy. I really want to hear what you think about legal knowledge. Thank you so much for crossing the disciplinary line and having the courage to do that. Let's work together to help build a better business school. Managers can do the same to help build a better organisation.

Law is the last great source of untapped competitive advantage, and tonight we're giving you the key to unlock that advantage. I hope that you never forget.

Dr. Genie: Obviously it's beneficial for organisations to adopt the transformational approach to things. But why do you think people are not seeing it? We're talking about greater shareholder value, and that's music to any business leader's ears. Why do they not recognise this?

Prof. Bird: I think it's a natural consequence of perspective and training. MBAs and management professionals, to do their job well, typically are trained quantitatively, look at problems from a quantitative perspective. That's a product of American and other business schools. In the late 1950s, there were two reports written by foundations in the US that criticised American business schools for not being quantitative enough, not being scientific enough. American business schools responded to that very enthusiastically, and the pendulum has swung from soft skills all the way over to hard skills.

That can be a benefit in many ways, but it can also be an impediment. Managers think differently than lawyers. They're trained differently than lawyers. Their assumptions are different. They focus on quantitative questions and deductive reasoning. Lawyers focus on the primacy of text and analysis. We focus on justice and fairness and argumentation and rhetoric. We engage in inductive reasoning. We're not scientists. We're humanists. Our disciplinary cousins or our siblings are most likely philosophy, history, English. Management and finance and marketing, as powerful as they are, are related, closely related to one another in the social sciences. We see ourselves as humanists.

It is that enormous gap between law and strategy. I think it's also because sometimes lawyers are quick to say no. I remember when I was a junior associate, the first client that I had, it was a problem related to trade secrets. We went to the company's firm because an employee said on a Friday afternoon, I'm leaving your company, your company is awful, and I'm going to your rival and I'm going to tell them everything.

We got invited in over the weekend to try to stop this, and I thought that they would be happy to see us. They weren't. They don't want to talk to you because they know that you're expensive. If I'm being billed out at 475 an hour, the last person they want to talk to is their lawyer. So they see lawyers as costs. They see the clock running when the lawyer walks into the room, and this can create an antagonism.

Lawyers are often too quick to say no, because no is the comfortable decision. No, you can't do that project. This violates the law. Instead, how about yes, but, or no, but. It's harder. It's more risky. It takes more work. But if you engage your management colleagues in that way, you'll be more successful in the long term. So it's just a different set of training and assumptions that has resulted in this enormous gap between law and strategy. You and I are all here to narrow that gap and bring them together.

Dr. Genie: There is one question which asks if you could give an example of a firm or organisation that embraces top‑level legal attention, a good example that inspires the audience and helps them rethink the way they make decisions.

Prof. Bird: It's hard to pick sides because most firms are in the prevention and in the value space. What I look to for excellent firms that respect the rule of law is firms that focus on corporate social responsibility, that look at sustainability, that look at human rights, because those firms that exhibit those values most visibly are the ones that will also respect the rule of law as well.

Who do I look to as role models for respecting the rule of law? It's highly ethical companies. That's who I look to, because the relationship between lawyer and CEO is attorney‑client privilege, and so you don't see a lot of that internal activity. So it's companies like Patagonia, and The Body Shop was actually good at this. But Patagonia is a really good example. It's an outerwear company that has a deep commitment to sustainability. They actually issued an advertisement that said, don't buy this jacket, because we want you to reuse and recycle it. These are people that respect what the rule of law is trying to accomplish, to build a just and fair society.

I think a sophisticated understanding of the rule of law, you can find it in major consulting firms like PwC and others. I've gone to PwC and a couple of those big firms. They generally get it, especially at the director, at partner level. Deloitte, another excellent place. They get it. It's those kinds of consultants that are forced to be agile, where you find the levels of activity, where you find this sustainable competitive advantage. They may not call it the pathways, but they understand and they're able to apply it.

Usually the most sophisticated firms. Pharmaceutical companies are actually quite good at this because they've got a lot of rules to deal with. Financial firms, when not consumed by greed, tend to be ones that have strong general counsel that respect the rule of law. Most people in organisations and in financial firms want to do the right thing. They want to be ethical. They want to be honest. They want to follow the rule of law. I've talked to bankers and financial professionals. They're not evil. They just want to do the right thing. Tell me what the rule is and I'll comply with it. But I need information from the lawyers. I need clear direction. Then I will follow the rule of law and move on.

It's generally the mistake, the inadvertent misperception, that brings a company on the path of liability. You want to avoid that path, because when you make a decision that violates the law, it is quite often irreversible.

Dr. Genie: That's true. We're going to pivot from that conversation to talk a little bit about culture and legal intelligence. One point that resonated strongly was the cultural dimension of legal knowledge. Legal strategy is not only about lawyers. It is about how managers think. In your research, how do organisations cultivate a culture where managers themselves develop legal awareness and judgement, rather than delegating all the legal thinking to the legal counsel or in‑house counsel or general counsel?

Prof. Bird: Culture is a powerful force in the organisation. A famous management scholar once said, culture eats strategy for breakfast. I think culture dines on ethics for lunch and perhaps snacks on social responsibility for dinner. What does that mean? Not that these values are irrelevant, but that culture is powerful. A negative culture can erode respect for the rule of law. A positive culture can elevate it in a powerful way.

How do you make this culture happen? Some of the answers initially are the obvious ones. You've heard this phrase before: the tone at the top. It must start at the top. Chief executive officer and other C‑suite executives must believe in the rule of law and its importance and make the rule of law a prominent part of their decision‑making during whatever engagements they have, whatever decisions they are making, even when it is to the short‑term financial disinterest of the organisation, because employees are watching. If they say, follow the law, and the manager avoids the law or just sets it aside when things get tough, they know quickly that executives don't really believe in the rule of law.

It's an enduring commitment to values. When they show that value through their lived experience, through their day‑to‑day activity, through the day‑to‑day operations, through the examples they set, other people will follow their lead. It takes time, though. People are sceptical. Once you have the tone at the top, you disseminate to the tone in the middle. Middle managers start implementing those ideas. Then you have the beliefs at the base, the people that actually run the machines, that are managing the assembly line, that are driving the delivery trucks. Once you have them believing in the rule of law, you have a culture that is throughout the organisation.

You need to create incentives, not just financial incentives. Those are helpful, but also an incentive to hold up examples of outstanding employees that typify the culture that you want, this culture of integrity. Once you have it, you want to maintain it. It's very easy to write information on a credo or have a value statement that says, we really believe in the rule of law. But do you, from day to day? That's where the decisions are made. Those daily actions, tone at the top, mood in the middle, belief at the base, introduced through lived examples, that's how your company changes culture gradually over time.

Dr. Genie: Incentives would drive the right kind of behaviour. I think you're advocating carrot versus stick instead of the stick.

Prof. Bird: It's not just financial. People go to work because they believe in what they do. There was a survey of about 100 seniors in American nursing homes. They were 80 to 90 years old, and they were at the end of their lives. They asked them, what are some things that you regretted doing? What were your life regrets? Most of them said, I didn't spend enough time with family. I would have liked to spend more time with my kids or pursue my hobbies or be my authentic self. Do you want to know how many of them said that their one regret was they didn't elevate shareholder value even higher? Zero. None of them said that. None of them said, I wish I spent more time at work. I wish I spent more time away from my kids.

We're human beings. We're not robots. We need to be incentivised by not just carrots and sticks, but also the compassion and respect from leaders who believe in the rule of law. If you do that, you're really going to the fundamental human condition of what we believe in. We want to flourish. We want to thrive. We want to be our best selves. That's the carrot you want, not just an increase in your pay cheque. That's how you build a culture.

Dr. Genie: I think it's wonderful. As we conclude this evening's lecture and very spirited Q&A, thanks to Professor Bird, I would like to leave us with one reflection. It's an increasingly complex world that we live in. Technologies are advancing rapidly, regulatory landscapes are evolving by the day faster than our laws. Our laws and policies are constantly playing catch‑up, and public trust in institutions is generally declining and constantly being tested.

Organisations cannot rely solely on innovation or speed or legal concepts alone. They must also cultivate judgement, and judgement is often grounded in a deep understanding of the rule of law. Lawyers therefore play a very important role in organisations. Professor Bird's work reminds us that legal knowledge is not merely a protective mechanism. It's meant to be a proactive tool, and when embedded thoughtfully, it becomes that invisible asset, one that strengthens culture, sharpens decision‑making and ultimately builds sustainable corporate value for any organisation.

Watch the session here: