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The Handbook: Law Firm Networks
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.215
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.216
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
215 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).
216 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).
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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.215
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.216
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
215 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).
216 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 -
