The Reality of a Publicly Traded Law Firm – How is a Car Crash Victim Served when her Lawyer is Focused on Share Price?
Slater and Gordon is a massive publicly traded international law firm that recently made the financial news in Australia when its share price took a fall of more than forty percent. The company has been an aggressive proponent of Alternative Business Structures (ABS), a law firm structure that permits non-lawyers to own law firms.
Critics of ABS have consistently maintained that the corporatization of law firms does not serve clients as well as a more traditional legal practice model. Indeed, lawyers are governed by professional standards and ethics which require counsel to avoid conflicts and act in the best interests of the client.
Slater and Gordon’s share prices took a big dip due to its acquisition of Quindell PLC. Financial commentator Tom Richardson called the deal either a “monumental blunder, or a magnum opus by an entrepreneurial management team on an acquisition trail to outstanding success.” Slater and Gordon has had to respond via an active public relations campaign defending the acquisition.
Of course, share price fluctuations are nothing new to big business. They are, however, relatively new for law firms and one wonders how this would affect the clients of such a firm.
Big business practices would dictate that a period of belt-tightening may occur following a share price dip. The question is how such a belt-tightening could affect an injury claimant. Would her lawyer be under pressure to settle her claim, even if it wasn’t quite ready? Would there be pressure to settle for less? Would her lawyer have access to the resources needed to properly present the case at trial?
Traditional law firms have, of course, also been run as businesses with revenue streams that fluctuate over time. The difference is that while lawyers facing a slow revenue period remain ethically bound to act in their clients’ best interests, the same cannot be said for shareholders. Indeed, shareholders are directed through the stock market to reasonably demand a return on their investment.
In his article Slater & Gordon Limited fights back in public relations battle”, Tom Richardson wrote about the share price drop. He stated:
“At the heart of the criticisms of the law firm are whether it will have the cash flows to back up its stated profits, revenues and accrual bookings.” [Emphasis added]
Note that the comment “…the heart of the criticisms of the law firm…” has nothing to do with the injury victims represented by the law firm and the conflict in which their legal counsel may be placed.
So, when it comes to the shareholders and the stock market, how will the innocently injured fare?
The Ontario Trial Lawyers Association opposes ABS in the models that have been studied by the Law Society of Upper Canada and lobbied heavily against the initiative during the recent bencher elections. There remains insufficient data from ABS jurisdictions that ABS facilitates access to justice.