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Law and Accounting Networks and Associations
Chapter 5 – Governance, Finance, and Network Operations
In traditional law firm networks, governance and operations will define the stature and overall quality of the
network. They are joined because the nature of the network is to create a structure in which members can
pursue their personal interests. In attaining these interests they benefit themselves, the other members, and the
network itself. Governance and operations issues overlap because governance of the network can have a
significant influence on the efficiency the network.
This chapter will analyze governance and operations from the point of view of their interactions. It will not
analyze the governance of the integrated vereins since they operate closer to the command and control model
of a law firm.
They do have similar issues because the individual firms are independent, and the partners may not be partners
of the verein.
Governance is defined as:
[t]he set of processes, customs, policies, laws, and institutions affecting the way a
corporation (or company) is directed, administered or controlled. Corporate governance
also includes the relationships among the many stakeholders involved and the goals for
which the corporation is governed. In contemporary business corporations, the main
external stakeholder groups are shareholders, debtholders, trade creditors, suppliers,
customers and communities affected by the corporation’s activities. Internal stakeholders
are the board of directors, executives, and other employees. Corporate governance is a
multi-faceted subject.193
Governance in a network is different than corporate governance.
Network governance constitutes a ‘distinct form of coordinating economic activity’ which
contrasts and competes with markets and hierarchies. As such, governance networks
distinguish themselves from the hierarchical control of the state and the competitive
regulation of the market in at least three ways: In terms of the relationship between the
actors, governance networks can be described as a ‘pluricentric governance system’ as
opposed to the ‘unicentric system of state rule and the multicentric system of market
competition.’ In contrast to state rule and competitive market regulation, governance
networks involve a large number of interdependent actors who interact in order to produce
public purpose. In terms of decision making, governance networks are based on negotiation
rationality as opposed to the substantial rationality that governs state rule and the
procedural rationality that governs market competition. Compliance is ensured through
trust and political obligation which, over time, becomes sustained by self-constituted rules
and norms.194
Law firm networks are also different from other forms of network collaborative efforts in a number of ways.
As stated, their objectives are to support the business interests of their independent members. They can also
193 Corporate Governance, WIKIPEDIA, en.wikipedia.org/wiki/Corporate_governance; see also A. DIGNAM & J. LOWRY, COMPANY LAW (2006) (for an
overview of the different theoretical perspectives on corporate governance).
194 Network Governance, WIKIPEDIA, en.wikipedia.org/wiki/Network_governance; see also K. van Kersbergen & F. van Waarden, Governance as a
Bridge Between Disciplines: Cross-Disciplinary Inspiration Regarding Shifts in Governance and Problems of Governability, Accountability and
Legitimacy, 43 EUR. J. OF POL. RES. 143, 171 (2004); see also FRITZ W. SCHARPF, GAMES REAL ACTORS PLAY: ACTOR-CENTERED INSTITUTIONALISM
IN POLICY RESEARCH, (1997); see also K. Nielsen & O. K. Pedersen, The Negotiated Economy: Ideal and History, 11 SCANDINAVIAN POL. STUD 79,
101 (1988).
30
Chapter 5 – Governance, Finance, and Network Operations
In traditional law firm networks, governance and operations will define the stature and overall quality of the
network. They are joined because the nature of the network is to create a structure in which members can
pursue their personal interests. In attaining these interests they benefit themselves, the other members, and the
network itself. Governance and operations issues overlap because governance of the network can have a
significant influence on the efficiency the network.
This chapter will analyze governance and operations from the point of view of their interactions. It will not
analyze the governance of the integrated vereins since they operate closer to the command and control model
of a law firm.
They do have similar issues because the individual firms are independent, and the partners may not be partners
of the verein.
Governance is defined as:
[t]he set of processes, customs, policies, laws, and institutions affecting the way a
corporation (or company) is directed, administered or controlled. Corporate governance
also includes the relationships among the many stakeholders involved and the goals for
which the corporation is governed. In contemporary business corporations, the main
external stakeholder groups are shareholders, debtholders, trade creditors, suppliers,
customers and communities affected by the corporation’s activities. Internal stakeholders
are the board of directors, executives, and other employees. Corporate governance is a
multi-faceted subject.193
Governance in a network is different than corporate governance.
Network governance constitutes a ‘distinct form of coordinating economic activity’ which
contrasts and competes with markets and hierarchies. As such, governance networks
distinguish themselves from the hierarchical control of the state and the competitive
regulation of the market in at least three ways: In terms of the relationship between the
actors, governance networks can be described as a ‘pluricentric governance system’ as
opposed to the ‘unicentric system of state rule and the multicentric system of market
competition.’ In contrast to state rule and competitive market regulation, governance
networks involve a large number of interdependent actors who interact in order to produce
public purpose. In terms of decision making, governance networks are based on negotiation
rationality as opposed to the substantial rationality that governs state rule and the
procedural rationality that governs market competition. Compliance is ensured through
trust and political obligation which, over time, becomes sustained by self-constituted rules
and norms.194
Law firm networks are also different from other forms of network collaborative efforts in a number of ways.
As stated, their objectives are to support the business interests of their independent members. They can also
193 Corporate Governance, WIKIPEDIA, en.wikipedia.org/wiki/Corporate_governance; see also A. DIGNAM & J. LOWRY, COMPANY LAW (2006) (for an
overview of the different theoretical perspectives on corporate governance).
194 Network Governance, WIKIPEDIA, en.wikipedia.org/wiki/Network_governance; see also K. van Kersbergen & F. van Waarden, Governance as a
Bridge Between Disciplines: Cross-Disciplinary Inspiration Regarding Shifts in Governance and Problems of Governability, Accountability and
Legitimacy, 43 EUR. J. OF POL. RES. 143, 171 (2004); see also FRITZ W. SCHARPF, GAMES REAL ACTORS PLAY: ACTOR-CENTERED INSTITUTIONALISM
IN POLICY RESEARCH, (1997); see also K. Nielsen & O. K. Pedersen, The Negotiated Economy: Ideal and History, 11 SCANDINAVIAN POL. STUD 79,
101 (1988).
30
