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Putting stock in the law -- and trading it

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KAI RYSSDAL: The Australian law firm Slater & Gordon made $9.5 million U.S. last calendar year. Not much in the grand scheme of things, we know. But it is the first time that a law firm has ever had to report its earnings. Slater & Gordon started selling shares on the Australian Securities Exchange this past May, making it the first publicly traded law office in the world. Nate DiMeo went down under to see what that might mean for lawyers and investors.


NATE DIMEO: Have you been injured in an accident? Do you suffer from Mesothelioma from exposure to asbestos on the job? Are you looking for mid-cap stock with strong investment potential?

[Slater & Gordon Ad]

woman 1: You know, you could get more if you talk to a lawyer.

Woman 2: Oh yeah!

woman 1: So, you know who to call. (Ring, ring)

Operator: Slater & Gordon.

Announcer: Call the Slater & Gordon legal help line.

In 1935 a couple of Melbourne lawyers started representing union workers in claims against the railroads. Today, Slater & Gordon has more than 20 offices across Australia from Adelaide to Wollongong. It's got ads all over the TV, and a managing director named Andrew Grech who likes shaking things up.

Andrew Grech: The Australian legal profession has a fairly conservative streak and sometimes that's put us at odds with our professional colleagues. But I think we pride ourselves on being innovators.

It took several years of wrangling with regulators to win Slater & Gordon a place on the Sydney Stock Exchange. Grech says that it's changed the whole dynamic of its business. He says the partnership model stopped working for Slater & Gordon.

Grech: The traditional models for ownership really lacked the flexibility necessary to reward talented, young lawyers early enough in their career.

He asks, Why would a talented young lawyer want to come to his firm and toil away for years with no guarantee of making partner? They're afraid to take time off. They're afraid that having kids will knock them off track. Now, he says, the firm can offer stock options and be flexible and reward its employees in any number of ways -- like a normal business.

But should a law firm be able to act like a normal business?

Steven Krane: I could see situations in which non-lawyers could interfere in the business of a law firm.

Steven Krane chairs the ethics committee of the American Bar Association. He says he can't imagine there'll be a time when firms will be allowed to list on the New York or London Stock Exchanges. Because they shouldn't be normal businesses. Lawyer jokes and maybe public perception aside, he says that law firms adhere to an ethical code that doesn't apply to other companies.

Krane: When you allow outside influences to come into play, the client is no longer getting the best judgment of the lawyer. They're getting the judgement of the lawyer tempered, or perhaps controlled, by someone who is not inculcated in the morals of the profession.

He says firms are afraid of not knowing who's going to have a say in how they run their business. What happens, for instance, if investors demand that a firm drop a client whose case doesn't look winnable?

Andrew Grech says that doesn't happen at Slater & Gordon. He says there are walls and regulations in place that make sure it won't. And anyway, as a public company, it's transparent. Who knows what's happening behind closed doors at one of those high-powered London or Manhattan firms with their tiny pool of very powerful clients.

Grech: The conflicts for them are enormous. They are typically very, very dependent on a very, very small pool of clients. That's a far greater risk to professional independence and ethical behavior than being a listed company.

He says Slater & Gordon doesn't make its money writing contracts or reviewing trusts. It makes its money by winning cases. It's just about as simple as that. It's direct. It's cut-throat. And it's been extremely lucrative. From where he stands, it sounds like the sort of thing a lot of people on Wall Street could get behind.

In Melbourne, Australia. I'm Nate DiMeo for Marketplace.

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