Although I'm a little late to the discussion on this, but the Financial Post has published an article discussing the possibility of allowing law firms to become publicly traded entities. The author makes some very good points in this article and it's worth a read. The short version is that, with the removal of the restriction that ownership of the firm must be held by lawyers in the UK and Australia, the author views that allowing law firms to go public is generally a good thing.

I'm not as concerned about the situation cited by the author about "Wal-Mart offering legal services", since with First Canadian Title and Chicago Title (through it's subsidiary FNF Canada) are already providing discounted legal services, that concept already exists. While I believe that such a practice de-values the work provided by a lawyer, I'm not sure that allowing law firms to go public would be particularly good or bad.

The only firms this would affect are the big law firms, and I don't believe that it will put smaller shops out of business. I was talking with a partner at a big law firm who had mentioned that the firm had considered delivering "retail" services to preferred clients which included notarizations, residential real estate and small claims work. He told me that it became an administrative hassle that yield virtually no profits. The areas in the large firms that it would affect are more likely the corporate, IP and litigation sectors, which cater more towards companies and are typically more profitable.

Other than the negative points raised by the author, the other negative impact that may arise may be in the motivation of the lawyers. In a typical partnership setting, many senior associates put their best efforts forward in order to make partner, giving them a share in the firms profits and a say (even if it doesn't go far) in the firm's direction. With a public company, the only way might be to provide stock options instead of making partner, but it doesn't really work. It could also mean that another lawyer could buy shares and basically achieve the same status as what some junior "partners" may have in the firm. The motivation to become an owner is basically wiped away, and it may hurt the quality of work. In addition, securities compliance may place an additional burden on the firm, resulting in reduced efficiency.

As the author notes, it's all speculation until we have a real case to study and determine if it will work. I don't think it will be a popular model, but it's an interesting concept.

        

 

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