The Perils of meta-regulating large law firms: codes, culture and values

Room 317
Level 3
Melbourne Law School
185 Pelham Street

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Legal Services Forum Event

This public seminar will be presented by Professor Joan Loughrey - University of Leeds, UK

There is a large literature on how organizational context can influence individual behaviour, both without and within the context of legal services. Meta-regulation in the shape of entity regulation is intended to address this by providing firms with incentives to develop firm based compliance systems or ‘ethical infrastructures’ that promote individual compliance with regulatory norms.

Effective professional regulation must take into account that individual lawyer conduct is likely to be influenced by the content of and interaction of, norms operating at three different levels: the values of the individual lawyer, firm based norms, and regulatory norms. As to content, insofar as norms at any of these levels fail to take account of, or exacerbate, particular regulatory or ethical risks, regulation will be ineffective at addressing these risks, no matter how sophisticated the regulatory mechanisms employed may be.  While this is an obvious point the paper will demonstrate that the regulation of large law firms by the Solicitors Regulation Authority (SRA) in England and Wales misses it. As to the importance of considering the interaction of the different levels of norms, the literature tends to focus on conflicts between firm norms and regulatory norms, and the extent to which such conflict causes individuals to disregard regulatory norms in favour of firm norms. However as the work of Tom Tyler demonstrates, if informal firm norms conflict with the values of individuals within the firm, those individuals are less likely to comply with the firm’s formal norms promoted by its compliance systems. The significance of this for the regulation of law firms and individual lawyers has been neglected, and this paper examines it, again in the context of the large law firm. These are important issues, both nationally and internationally. An increasing number of jurisdictions are considering the introduction of entity regulation for law firms as a means of promoting compliance with professional norms. Yet, as this paper argues, the meta-regulatory project will be compromised if regulators fail to take account of the risks that large law firms present, and how the interaction between firms’ informal norms and individual values can influence individual responses to regulation.

Professor Joan Loughrey is Deputy Head of the Law School at the University of Leeds, UK. A graduate of Somerville College, Oxford, Joan qualified as a solicitor in England and Wales and Hong Kong, practising as a commercial litigator before entering academia.  Joan’s research interests are in corporate governance and company law, regulation of the legal profession, the law regulating lawyers (especially conflicts of interest and legal professional privilege) and the regulation of conduct in financial services. She has published extensively across these fields, including a major monograph, Corporate Lawyers and Corporate Governance (Cambridge UP, 2011)