Understanding how the incorporation of a law firm morphs professionalism

Gordon, T. (2023). Understanding How the Incorporation of a Law Firm Morphs Professionalism. University of New South Wales.

The organisation of professions has been the subject of rich academic attention over the past few decades as scholars have sought to understand how different organisational structures influence professionalism. This focus has been spurred by an increasing concern that professionalism is in decline. The outcome has resulted in considerable empirical research evaluating the normative value systems in different organisational structures within which the professions, including lawyers, work. Missing from this analysis, however, is an understanding of how professionalism morphs in law firms that are structured as companies, such as incorporated legal practices (ILPs).

The absence of scholarship on ILPs and professionalism is curious for several reasons. First, ILPs are the antithesis of partnerships. In an ILP, unlike a partnership, non-lawyers can hold unlimited equity and share fees with lawyers. Second, it has been more than 20 years since ILPs have been permitted in New South Wales (NSW), Australia and thousands of ILPs exist today. Third, several jurisdictions, including every State and Territory across Australia, England and Wales, Utah and Arizona, have amended their legislation to permit non-lawyers to hold unlimited equity in law firms. Fourth, notwithstanding, non-lawyer equity in law firms continues to be opposed by numerous regulators of the legal profession across Europe and North America. Such opposition is grounded in a fear that non-lawyers will erode professionalism. This thesis responds to this fear by building a foundation for subsequent studies to understand how professionalism morphs in law firms with non-lawyer equity by focusing on ILPs in NSW. It addresses three questions: (i) How did the law firm partnership model in NSW shape professionalism before incorporation was permitted? (ii) What are the motivators for incorporating a law firm? and (iii) How does the incorporation of a law firm then influence professionalism? The first question was answered by tracing the development of law firm organisational structures in NSW and their corresponding paradigms of professionalism.

The second and third questions were answered by senior leaders of law firms in NSW who participated in in-depth interviews. The findings reveal that incorporation in the ILPs studied in this thesis has not led to an ostensible erosion of the traditional professionalism paradigm. Rather, incorporation has led to a blend of hybrid norms. Two key factors have led to professionalism being morphed in this manner. The first is a concerted effort by the ILPs studied in this thesis to control the involvement of non-lawyers in their ILP, and the second is a dual regulatory framework that treats an ILP as a corporate entity but at the same time ensures that the professional and ethical obligations of lawyers in NSW are upheld.

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