Can Law Firms Practice Conscious Capitalism?
What is Conscious Capitalism?
As explained by Conscious Capitalism, Inc., a non-profit organization dedicated to cultivating the theory and practice of Conscious Capitalism, the movement “builds on the foundations of Capitalism – voluntary exchange, entrepreneurship, competition, freedom to trade and the rule of law.” The movement has the following four pillars:
Higher Purpose – A purpose that includes, but is more than making profit. For example, our firm’s higher purpose is to make a positive impact by being a great place for great people to work. If we can achieve that, we believe we can provide jobs to sustain families and provide revenue to our vendors.
Stakeholder Orientation – Recognizing that there are several stakeholders in the outcome of a business. These include employees, vendors, customers, investors, and communities in addition to the business owners.
Conscious Leadership – “Human social organizations are created and guided by leaders – people who see a path and inspire others to travel along the path. Conscious Leaders understand and embrace the Higher Purpose of business and focus on creating value for and harmonizing the interests of the business stakeholders.”
Conscious Culture – The values, principles, and practices underlying the business that connect the stakeholders to each other and the purpose, people, and processes embodied by the business.
Challenges for Law Firms
I believe the biggest challenges for law firms adopting Conscious Capitalism lie foremost in the historical, prevailing legal-industry culture and secondarily to certain regulations of lawyers by state bars.
As to regulations, law firms and lawyers are in restricted in many states from sharing profits and client fees with non-attorneys as well as sharing ownership with non-attorneys. These regulations would likely prohibit employee stock option plans. However, even with these limitations, I believe it is still possible for law firms to broadly provide stakeholder orientation for its employees, clients, vendors, and the community. The other tenants of Conscious Capitalism – higher purpose, conscious leadership, and conscious culture – should not be impacted by state bar regulations.
In my opinion, for Conscious Capitalism to really take root and thrive in a business, the owners and leadership purposefully need to take a broader view of the value delivered. This means that wins are defined as results in addition to profits. Giving back to the community and professionally and personally developing employees are just a few of the broader wins. The legal industry’s adoption of profits per partner as a key metric to compare and rank law firms places a heavy focus on profit. Longer term investments, like employee development, can be at odds with annual profits per partner results in the short term. This is unfortunate, but not insurmountable as many law firms routinely commit to a higher purpose.
Want to hear more about the Conscious Capitalism movement or get involved, visit http://www.consciouscapitalism.org.
To read more about Conscious Capitalism in the legal industry and other law firm culture topics, please visit our Culture Counts blog.
In addition to Thriving Attorney, Darin M. Klemchuk is founder of Klemchuk LLP, a litigation, intellectual property, and transactional law firm located in Dallas, Texas. He also co-founded Project K, a charity devoted to changing the world one random act of kindness at a time. Click to read more about Darin Klemchuk's practice as an intellectual property lawyer.