Simon Archer directs us to a Sydney Morning Herald piece from a couple of weeks ago reporting the public offering of shares in a law firm, Slater & Gordon Ltd., pretty much a first in the common law world. As Simon A. points out, Australia changed its laws to allow such public participation. The prime concern about letting law firms adopt this corporate financing model has to do with a potential conflict between a company's duty to its shareholders to profit and lawyers' duties to the client and the administration of justice. The SMH piece says that Slater & Gordon's prospectus warns prospective investors that their interests will come third, after the two professional duties mentioned.
Do our readers think this prioritizing of aims can work?
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I think Slater & Gordon will pull it off, and others will follow — first in Australia, then in post-Clementi Britain, and then well down the road, North America (never underestimate the power of our governing bodies to postpone the inevitable).
I think Mr. Grech is being a touch disingenuous when he dismisses ethical concerns with "managing conflicts was already routine for lawyers and no different than in other organisations." The concern here isn't a traditional conflict between clients, with which law firms are familiar; indeed, as a plaintiff-side personal injury firm, S&G would appear to have few such problems anyway as compared to, say, a corporate or full-service firm.
The fundamental ethical concern with a publicly owned law firm is the potential for divergence between the best interests of the client and of the shareholders — and that the firm will act in ways that maximize profit over professionalism. You can colour me skeptical that this is not already happening today. Law firm partners have never pressured a colleague about pursuing a case that is damaging the firm financially? Lawyers with a fiscal stake in the firm are just fundamentally better and more pristine than equally invested non-lawyers would be?
The crux of the argument that lawyers must control law firms is that lawyers can be trusted to do the proper professional thing more so than can those unwashed shareholder types. This is a very strong myth within lawyer culture, but I seriously doubt many outside the profession buy it — and judging from the poor public image lawyers possess, more than a few people would probably find it risible.
This isn’t to say that there aren’t bumps in the road ahead for law firm IPOs — as a colleague of mine says, wait for the first shareholder action that charges a law firm’s board of directors failed to act in the shareholders’ best interests. And the cultural resistance will be powerful, no question. But the market forces here, and the revenue that will be generated by firm IPOs, will prove too much to overcome. Conflicts over priorities are resolved in the business world — the client world — every day, and I think it's only a matter of time, and a lot of agonizing over ethics, before lawyers come to do the same thing. I don’t see this going away.