Should law firms predicate their mergers upon client interests?
The paper linked below was presented by Robert Millard at the Saïd Business School Professional Services Firm conference held in Boston, Massachusetts on 12-13 August 2019, immediately after the Academy of Management annual conference. It draws together elements of Stakeholder theory and the literature of legal ethics, so try to provide an answer to this question.
The paper explores whether sound business imperatives exist, and whether clients and society have a right to expect, that law firms should predicate their mergers upon client interests. Most Merger Theory literature is premised on the optimisation of shareholder value, and almost exclusively in economic terms. Almost all such literature from the perspective of Stakeholder Theory concentrates on internal stakeholders, mostly managers and employees. Very little research has been undertaken on the specific role of customers/clients in mergers generally and very little indeed specifically in the case of law and other professional service firm mergers. Besides assumptions implied in the Resource- Based View (RBV) of the Firm and Theory of Competitive Advantage, that clients will simply seek other alternatives if the merged firm’s value proposition falls below that of other options available, little has been published about how clients perceive value in such mergers, either.
Furthermore, to the economic and ordinary moral imperatives that might exist might also be added a societal imperative. Society has clothed lawyers and their firms with a measure of protection from market forces, to safeguard the special relationship required of lawyers toward their clients and the role that this plays in upholding the rule of law. The resulting social contract is articulated in rules and codes such as the Solicitors Regulation Authority (SRA)’s Handbook in the United Kingdom (SRA 2018) and the American Bar Association (ABA) Model Rules of Professional Conduct in the United States (ABA 2018).
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