The Two Faces of Lawyers: Professional Ethics and Business Compliance With Regulation

Abstract:     
This article reports on the first major quantitative study of businesses that explores the use and influence of lawyers. Previous research has only surveyed or interviewed lawyers. Our findings are particularly robust in regards to lawyer behaviors because they do not derive from lawyer self-reports.

The professionalism thesis holds that what lawyers supply to clients is constrained by norms of professionalism, so that lawyers become compliance monitors. The devolution of professionalism thesis holds that what lawyers supply is constrained by client demand, so that lawyers enable client behaviors which are not oriented towards compliance.

We find that neither thesis applies to the market for corporate legal services. The devolution thesis fails to recognize that clients vary in their attitudes towards law and legal risk. As a result of client demand, a significant portion of what lawyers supply is service as compliance monitors. The professionalism thesis fails to recognize that norms of legal professionalism support lawyers' action as gamesters and adversarial advocates. As a result, even when clients demand lawyers who act as compliance monitors, lawyers supply services that incline clients to increasingly accept legal risk and adopt a gamester approach to law and regulation.

Our findings extend the market model by detailing mechanisms through which lawyers may influence compliance.

Number of Pages in PDF File: 48

Keywords: lawyers, corporate governance, regulatory compliance, professionalism

JEL Classification: J44, K20, K22, K32, L84, M14

Accepted Paper Series