If you graduate from law school with a world view that is determinedly anti-globalist, anti-capitalist, pro-worker, pro-environment and pro-indigenous peoples — then law firm Slater & Gordon would be just the place you’d like to work.

This is the firm that has taken on big corporations on behalf of the little guy, which looks after exploited workers. Over the years, Slater & Gordon has featured in the Green Left Weekly probably more often than any other law firm. That’s because it has represented NGOs against a mining company, asbestosis victims, anti-globalisation protestors and unions.

If ‘big end of town’ firms like Mallesons, Blake Dawson, Waldron or Clayton Utz announced that they intended to raise a staggering $35 million by way of an IPO no one would bat an eyelid. But Slaters?.

However, is turning a law firm into a public company with large numbers of shareholders is a smart idea? Slater & Gordon are not alone in looking to the ASX. A Perth-based consortium of law firms, Integrated Legal Holdings, is heading down the same path.

In Australia, the US and the UK, recent changes to the regulatory regimes governing law firms are enabling the introduction of outside ownership. This is a welcome development because the provision of legal services ought not to be hamstrung by archaic restrictive practices.

But there hasn’t been a rush to the equity markets in any of these jurisdictions. Why? Because turning a law firm into a public company would appear to be fraught with risk, according to the University of Chicago’s Professor Richard Epstein,  who describes the notion that law firms should be owned by public shareholders as a ”dud”.

According to Epstein, there are three reasons why law firms shouldn’t head down the IPO path: “The financial interests of the equity shares would reduce lawyers’ income, the numerous shareholders would make firms too unwieldy to operate efficiently, and public ownership would force unwanted disclosure of finances and other sensitive matters,” he writes.

Epstein’s views are echoed in the UK. Giles Murphy of Smith & Wilkinson told The Lawyer last year that the injection of funds from an IPO is a “one-off payment that won’t be repeated. A partner joining the equity the following year wouldn’t benefit”.

Howard Morris, from another UK firm, Denton Wilde Sapte, agrees, saying that there is no convincing commercial case for law firms to list on the stock market because law firms don’t need a lot of capital.

There is also a potentially serious ethical issue for Slater & Gordon, given the type of work it undertakes. It is not hard to imagine that an institutional shareholder might feel very uncomfortable holding Slaters stock at the same time as holding stock in another listed company being sued by Slaters.

And then there is the question of whether or not shareholder interests and those of clients might diverge. If shareholders are unhappy with performance and want Slaters to pull back from doing a certain type of work because it is not sufficiently profitable, what happens to the clients in this area?

Peter Fray

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