Locked in the jaws of the market?

Alex Novarese has written a typically robust blog about the way leading London (HQed) firms have clung to lockstep encourages partner exits to firms redder in tooth and claw.  It’s a sign of the way in which firms are locked into their markets – only able to mitigate, rather than overcome a race to (what I see as) the bottom. Legal services are valued predominantly, perhaps purely, by profit. Quality is measured in bills delivered, weighing down any balanced-scorecard. Financialisation rather than professionalism is the commercially aware mindset.

There is decent data on in-house lawyers that shows that incentivisation (giving in-house lawyers higher, equity-based rewards) increases the conduct and compliance risks of their host organisations (see here). We should be as worried about the impact of incentives on lawyers in private practice. They burnish their claims for independence without always knowing what that means. The roll-call of private practice firms in (fairly) serious trouble with professional regulators is growing – although one can’t help but be darkly entertained by the thought that a fine of Clifford Chance, or even White and Case, proportions is going to prompt serious re-thinking. The reputational damage? Maybe, that’ll make a difference to some. But we need to remember that even large firms can be heavily dependent on small circles of clients. Many (all perhaps) of those circles are inhabited by banks and those in their shadows; they like lawyers who are keepers; and they know quite a bit about the costs of doing business.

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About Richard Moorhead

Director of the Centre for Ethics and Law and Professor of Law and Professional Ethics at the Faculty of Laws, University College London with an interest in teaching and research on the legal ethics, the professions, legal aid, access to justice and the courts.
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2 Responses to Locked in the jaws of the market?

  1. Richard Moorhead says:

    I have been asked to post the following anonymously…

    Does reputational damage really impact large firms? Or are their reputations are so vast that these are but a minor, all but invisible, blot?

    Andersen fell under catastrophic pressure, but KPMG in the USA survived the tax shelter debacle unscathed apart from the fines (because the DoJ daren’t reduce the big 4 to 3), and the recent London firms’ SDT fines (query Locke Lord perhaps) are water off a duck’s back for those concerned. Similar breaches by a small firm would be catastrophic. Clyde & Co even represented Clifford Chance in the SDT.

    Despite extensive press coverage, the Freshfields M&S conflict case did not, so far as I am aware, impact materially on their reputation and there was much sympathy among their peer group.

  2. Francis Dingwall says:

    I agree, but perhaps a second scandal (or adverse finding in the SDT) could do serious reputational damage. So if a Freshfields partner appeared again in the SDT with a serious conflict, even after this length of time, maybe that would damage their brand?

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