How Public Law Firms Would Benefit GCs
General counsel have long complained that lawyers have no incentive to deliver services economically. The focus on generating profits through hourly billing produces an incentive to pad lawyer hours and maximize work, they argue.
That focus could change if ethics rules changed to allow lawyers to sell shares in their law firms, according to a commentary published in the American Lawyer. Law firms that go public may have an incentive to raise shareholder profits by becoming more efficient.
Law firms could prevent abuses by offering only minority control to outside investors and by barring access to client information, writes Milton Regan Jr., a professor at Georgetown University Law Center. Firms could also warn investors that their primary duty is to the courts and then to clients, and that these responsibilities may conflict with shareholder interests.
“Outside equity ownership might not be the end of the profession as we know it,” Regan writes. “It might lead to more long-term investment. It might broaden the focus of firm management to include the firm as a whole, not just a few individual lawyers who produce big revenues. And it might take the shine off high-producing laterals whose only connection to the firm is the amount of their year-end distribution.”
The issue is much in the news since Australian law firm Slater & Gordon went public, ABAJournal.com noted in a post yesterday. British firms are expected to allow nonlawyers to invest in law firms by 2010.