Diligence

Diligence (pronounced dil-i-juhns or dee-lee-zhahns (French))

(1) Constant and earnest effort to accomplish what is undertaken; persistent exertion of body or mind.

(2) In law, expressed often as “due diligence” the extent of care and caution required of a person or entity in the relevant circumstances.

(3) In the law of Scotland, the process by which persons, lands, or effects are seized for debt; process for enforcing the attendance of witnesses or the production of writings.

(4) Care; caution (obsolete).

(5) A public stagecoach, especially of the small, fast type once used in France (archaic).

1300–1350: From the Middle English deligence (constant and earnest effort to accomplish what is undertaken), from the Old French dilligence (attention, care; haste, speed) and directly from the Latin dīligentia (carefulness, attentiveness), from diligentem (nominative dīligēns) (attentive, assiduous, careful), the present-participle adjective from diligere (single out, value highly, esteem, prize, love; aspire to, be content with, appreciate (originally “to pick out, select”), the construct being dis- (apart) + legere (choose, gather), from the primitive Indo-European root leg- (to collect, gather (with derivatives meaning "to speak (in the sense of “to pick out words”).  The meaning-shift was gradual and evolved from “love” through “attentiveness” to “carefulness” to “steady effort”.  The legal sense “attention and care due from a person in a given situation” dates from the 1620s.  A now probably extinct synonym was worksomeness.  The –ence suffix was a word-forming element attached to verbs to form abstract nouns of process or fact (convergence from converge), or of state or quality and was from the Middle English -ence, from the Old French -ence, from the Latin –entia & -antia (depending on the vowel in the stem word).  The Latin present-participle endings for verbs stems in -a- were distinguished from those in -i- and -e- and as the Old French evolved from Latin, these were leveled to -ance, but later French borrowings from Latin (some of them subsequently passed to English) used the appropriate Latin form of the ending, as did words borrowed by English directly from Latin, thus diligence, absence et al.  There was however little consistency, English gaining many words from French but from the sixteenth century the suffix –ence was selectively restored, such was the reverence for Latin.  In French, the word dates from the 1740s and was a shortened form of carosse de diligence (literally “coach of speed”).  The stage-coach sense should be pronounced as in French because use will be so rare it’ll be thought correct rather than an affectation though if preferred, the further truncation “dilly” was common.  Diligence is a noun, diligent is an adjective and diligently an adverb; the noun plural is diligences.

In commercial law, due diligence describes the comprehensive and systematic review of all aspects of a business, investment opportunity or legal matter before a transaction or decision is made.  The process involves an examination of all available information (including identifying what is not available) related to the subject, including financial statements, contracts, legal relationships, intellectual property, internal structures and such obligations which may exist.  The purpose of due diligence is to identify potential risks, liabilities, or opportunities associated with the matter to ensure that whatever decision is taken, is made with a full understanding of all matters.  The companion term, summary diligence, isn’t drawn from law but describes a similar but less extensive process; less detailed and less comprehensive review which is restricted usually to only the critical aspects of the matter.  Summary diligence is undertaken when it’s certain that even in a worst case scenario, losses will be minimal or outweighed by other advantages.

Due diligence is the investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or contract with another party or an act with a certain standard of care.  Although the concept also exists as a legal obligation, it’s also used of the process undertaken in self-interest to ensure all relevant information is known an assessed, prior to a decision being taken.  As a legal device, proof of others having failed to have exercised due diligence can in some circumstances be used as a defence against allegations of inadequate (as opposed to misleading) disclosure.  Alternatively, against allegations of negligence, if one can establish that the threshold of “reasonable care” had been reached, a defence can also succeed even if the process was in some way incomplete.  In the US where formally it entered the language of commerce and law during the 1930s, it was originally merely an indicative description of the process of investigation before, via an adjectival career, becoming both noun and legal jargon.  Depending on what’s required and as a general principle the larger the quantity and the more complex the quality of information to be assessed then the greater resources will be required duly to be diligent but the principles are the same of any data set and many check-lists are available for box-ticking.  Depending on what’s involved, there may be a functional need to create dozens of sub-headings under the boxes but, within the bounds of fuzzy logic, most check lists suggest the categories are something like: (1) Financial, (2) Legal, (3) Tax, (4) Compliance and Regulatory (5) Commercial, (6) Human Resources, (7) Intellectual Property, (8) Information Technology, (9) Environmental & (10) Health and Safety.

Lights burning at a quarter to midnight: the company formerly known as Credit Suisse.

The classic example of the use of the due diligence process is in mergers & acquisitions (M&A) and probably in no M&A activity is it of more interest than in the financial services sector.  It was notable therefore that the process or arranging the “purchase” by Swiss bank UBS (the old Union Bank of Switzerland) of its erstwhile national competitor Credit Swisse (the old Schweizerische Kreditanstalt) appeared to be completed in the time that either institution would once have though inadequate were either contemplating acquiring a reasonably successful suburban dry-cleaning shop.  It was however a most unusual purchase which should more correctly be thought a takeover or absorption and the timing of the announcement was based not on the satisfactory completion of the due diligence process but the need to make an announcement before the markets opened the next Monday morning.  Despite all that, UBS certainly undertook an exercise in due diligence, dotting every i and crossing every t, once the Swiss government had made it clear they were making an offer the bank shouldn’t refuse.  UBS’s interest was less in the exact state of Credit Suisse’s books (something that would take even a big team at least weeks to determine) than in ensuring whatever losses subsequently were sustained, they would be underwritten by the Swiss exchequer and not the bank.  To ensure that, UBS would have ensured diligence was more due than usual.  So there’s somewhere a “secret protocol” to the UBS-Credit Suisse pact, presumably well protected in a Zürich vault and it’s likely to be a document the Swiss government will be unlikely to discuss, let alone publish.

Hank Paulson before the US Congress, 2008, "explaining" the bank bailouts at the start of the global financial crisis (GFC).

Whether whatever the Swiss government undertook can be characterised as something like un-due diligence (as opposed to undue diligence) might emerge in the months ahead as the true position of Credit Swisse unfolds because it may be even within the organisation, nobody can be certain how high the liabilities might go, the track derivatives can follow being among the more unpredictable in the world of gambling.  Still, the fear over that weekend was something like Hank Paulson (b 1946; US treasury secretary 2006-2009) had little trouble conveying to the congress in the wake of the failure of Lehman Brothers (1850-2008) and the same risk of “contagion” meant Bern really had little alternative that have the Swiss taxpayer assume responsibility for whatever is going to happen.  If that turns out to be effectively a very big credit default swap (CDF), the Schweizerische Nationalbank (SNB, the Swiss central bank) quantitatively may need to easy many Swiss francs.

Photo due diligence

There are two aspects to "photo due diligence".

(1) Ex ante (before the photograph is taken) due diligence is assessment of factors such as the background, the environment and (often especially) who else will appear in any photo.  This is of some importance to those for whom public image management is an important part of their career.  One would not wish to be photographed in the “wrong” surroundings or be seen with the “wrong” people.

(2) Ex post facto (after the photograph is taken but before release for publication) due diligence is really possible only when “embargo” arrangements exist with the photographer, something sometimes a condition imposed by event organizers.  When photographs needed to be processed from negatives this something sometimes difficult to enforce but in the digital era, unsuitable images can instantly be deleted.  Out in the wild, where the paparazzi roam, it’s a contractual arrangement between subject and photographer and there is some evidence of cooperation.

Photo due diligence failure: Tony Abbott (b 1957; Australian prime-minister 2013-2015) photographed (left) outside the Reject Shop, Canberra, Australia, June 2015.  There was some prescience in the image because some three months later, the Liberal Party ejected him as leader and thus from the prime-ministership.  In this case, the failure of due diligence was among those minders who arranged the photo-opportunity although it’s surprising Mr Abbott’s political antennae seems not to have been sensitive.

Photo due diligence success: Lindsay Lohan at Christian Siriano’s fashion show, New York City, February 2023.  This one could be used in a case study of how to tick the due diligence boxes: (1) prestige brand-name, (2) front-row seating, (3) an acceptable degree of ethnic diversity, (4) the show well attended & (5) ideal lighting for photography.