The Harvard Law School Corporate Governance Blog carries a post regarding a lecture by John C. Coates titled “On Being a Corporate Lawyer” that he delivered on being appointed the John F. Cogan, Jr. Professor of Law and Economics. A webcast of the lecture is also available.
Coates talks about trends in current corporate law practice and shares his thoughts on what the future holds. Having been a partner at a top corporate law firm in the US and later a leading corporate law academic, Coates is well placed not only to deal with structures of law firms and their management practices, but also the interplay between law firms and corporates on the one hand (representing the demand side) and law schools and law students on the other hand (representing the supply side).
Some of the key points he makes regarding current practices in corporate law practice are:
- Law firms lack size compared to their peers in other service industries, such as accountants and other consultants;
- M&A activity hardly exists among law firms; the established players continue to stay on the top for a very long period of time;
- Although lawyers help their organize their clients’ affairs, they themselves are largely disorganized;
- Established relationships still dominate legal practice; law firms rarely get fired altogether by a client;
- Law firms are paid less than the value of the service they provide; they command substantially higher fees that are never usually paid due to the billable hour method followed (rather than a percentage of transaction commanded by investment banking firms, for instance);
- The lack of higher fees is also reflected in overworked lawyers (again a function of the billable hour method where lawyers need to put in longer hours).
As for the future, he envisions greater mergers and acquisitions of law firms. One of the ways in which acquisitions will be accomplished is through payment for acquisitions by stock, which means that law firms would possibly list themselves on stock exchanges, not so much to raise cash for their operations, but to use stock as currency for acquisitions. An IPO of a law firm is not unusual, as it has already occurred in Australia and is likely to occur in the UK not too long in the future. Concerns that Coates raises is for law firms to deal with the leverage issue – successful firms will be those that deal with this issue well – and ways to allow lawyers to preserve intellectual attachment to their work and to ensure retention.
Coates also alludes to the intense competition among law firms for hiring top graduates from recognized law schools, and that the fact that the supply of good-quality lawyers is not increasing at a pace enough to meet with the rising demand.
Although the lecture is set in the backdrop of corporate legal practice in the US, a substantial part of Coates’ observations would apply to Indian legal practice as well.