Seven Perspectives on Law Firms' Going Public

Bloomberg News ran a story yesterday headlined "Slater & Gordon Lifts Curtain on Global Law Firms Going Public," which features excerpts from interviews with seven people, including yours truly, offering their views on what the implications might ultimately be for US firms. In the order in which they appear in the article:

• "If the English firms can sell stakes in their law firms publicly, that will then give them an advantage,'' said Ralph Baxter, the chief executive officer of the 924-attorney San Francisco-based firm Orrick, Herrington & Sutcliffe. ``If the rules were to change, we would then examine what's in our best interest to do.'
• "Among the top 10 issues that I worry about, that's not in the top 100,'' said H. Rodgin Cohen, the chairman of New York's Sullivan & Cromwell.
• Like law firms, investment banks resisted going public, said Charles Geisst, the author of "100 Years of Wall Street.''
  "They were hesitant; it took awhile,'' Geisst, a professor at Manhattan College in Riverdale, New York, said of the investment banks. "Law firms could go public for the same reason that the investment banks had to go public. The number of the transactions were increasing and it required them to have more capital and the partners couldn't provide it.''
• Said Jeremy Black, associate partner in the professional practices group at Deloitte & Touche in London, "Firms are quite interested in it. There are certain firms that are further down the track.''
• Another Australian firm, Perth-based Integrated Legal Holdings Ltd., intends to set a schedule for their IPO in the next few weeks, said Brett Davies, a partner at ILH, in an e- mail. ILH has been approached by 89 law firms, most with a range of eight to 32 partners, to discuss mergers, he said. "I'm surprised the USA is so far behind the times,'' Davies said in the e-mail. "We are going there next,'' Davies said of the U.K. "Then we are coming to the USA. Get ready. There are a lot of opportunities in the USA for our business model.''
• Stock sales might force lawyers to put shareholders above clients and create conflicts between the attorney-client privilege and Securities and Exchange Commission disclosure requirements. "It's a perpetual conflict, at least potentially, with non- lawyers controlling a law firm,'' said Steven Krane, the chair of the American Bar Association's ethics committee and a partner at New York's Proskauer Rose. "There's very little interest in changing the rules.''
• New York legal consultant Bruce MacEwen said that if U.K. firms begin going public, U.S. firms may push for similar changes "within two to three years. You will see pressure here in the U.S. for the regulators to permit it,'' said MacEwen, who is also editor of the Adam Smith Esq. Web site that focuses on the issue of law firm economics.

Who do you think is closest to the truth here—understanding that all of us are looking into the future?

The outlier among the commenters is clearly Steve Krane (said without criticism, but merely characterizing the remarks: I know Steve and have spoken on panels with him) . In particular, does Steve's concern about a collision between attorney-client privilege and SEC disclosure requirements make sense? I must confess I see it as more an imaginary than a real issue. After all, public companies protect trade secrets and proprietary information all day every day without running afoul of 10-K regulations. If Coca-Cola were considering going public today, would its legal counsel advise that doing so might jeopardize the secrecy of The Formula?

Steve's second observation is that "there's very little interest in changing the rules," but based on remarks from Australian, UK, and US observers, there's quite a bit of interest in changing the rules.

What are your thoughts on this? Let me know.

Rodgin Cohen and I were also interviewed on Bloomberg TV for a companion piece, which I'll feature here subsequently if I can get a suitable digital file version.