SOCIO-ECONOMIC EFFECTIVENESS OF LEGAL CONSULTING IN THE CONTEXT OF THE INVESTMENT APPROACH

Author

, professor, Kharkiv, Pushinska, 77
ORCID ID: 0000-0003-4761-9620

In heading

Economic theory of law;

Signed print

22.05.2018

Issues number

2018 - № 2 (33)

Page

91-107

Type of articles

Scientific article

Code UDK

33.01:364-787.82 322.01:346.543

ISSN print

2411-5584

Abstract

Problem setting. Effective legal consulting is a determinative factor of a legal economy, undertaking economic reforms and business competitiveness in terms of European integration. Hence, substantiation of approaches, methods, criteria and ratios for assessing socio-economic effectiveness of entrepreneurial activities in the field of rendering legal services is of significant importance.
Recent research and publication analysis. Economic analysis of law constitutes the methodological basis of researching effectiveness of legal consulting. Concepts of R. A. Posner and G. S. Becker’s concept of economic imperialism have considered fundamental frameworks of this branch of science. Papers of Ukrainian economists O. A. Hrytsenko, O. V. Ovsiienko and L. S. Shevchenko as well as lawyers O. A. Volovyk and N. M. Onishchenko are dedicated to various aspects of economic analysis of law. However, scholars have not paid attention to legal consulting in general and its socio-economic effectiveness in particular as an important field of research for economic analysis of law.
Paper objective. The article objective is to substantiate the investment approach to analysing socio-economic effectiveness of legal consulting and to ascertain criteria and ratios of the effectiveness.
Paper main body. Analysis of socio-economic effectiveness of legal consulting should draw on the investment approach, according to which expenses of legal business entities for benefits, training and enhancing staff qualification are determined as investments in firm-specific human capital – knowledge, skills and abilities for the professional legal activity. From the standpoint of the investment approach to assessing socio-economic effectiveness of legal business, researchers should apply a ratio of return on investment in human capital of lawyers. This ratio is equal to law firm’s gross revenue (taking into account benefits for law firm staff) divided by benefits for law firm staff.
Conclusion of the research. The conducted analysis indicates that a share of benefits for law firm staff in gross revenue of the law firms is inconsiderable despite the leading role of lawyers in providing legal consulting and the great level of return of investments in their human capital. In 2016-2017, gross revenue of the law firms was 30-35 and 18-25 times greater that these investments, respectively. Having researched reasons of the significant gap between amounts of investments in human capital of lawyers and gross revenue of the law firms, the author concludes that effectiveness of national legal consulting is grounded in a model of cheap labour force applied to interns. To get a job, interns agree to receive a low salary, work beyond the required amount of time and face the absence of training and career prospects. This model leads to losses of legal service quality and reputation of law firms, transformation of the firms into quasi-consulting ones, deterioration of professional qualification, the decline in the staff qualification level, socio-economic efficiency and competitiveness of the national legal business, and dysfunction of legal consulting. The author highlights that the law firms should perceive financing staff enhancement as investment in human capital of lawyers being a prior resource of consulting business rather than expenses.
Short Abstract for an article
Abstract. The author substantiates the investment approach to analysing socio-economic effectiveness of legal consulting, using the ratio of return on investment of law firms in human capital of lawyers. The author indicates the considerable gap between investments in law firm staff and gross revenue of national law firms. The author proves that application of the model of cheap labour force by legal business leads to losses of quality, the decline in the professional level of consulting activities, the decrease of socio-economic effectiveness and the decline in competitiveness of legal consulting.

Keywords

legal consulting, socio-economic effectiveness of legal consulting, investment approach, return on investment in human capital of lawyers.

Reviewer

External reviewer

Article in PDF

91-107

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16.04.2018