Professional Self-regulation in North America: The Cases of Law and Accounting

Professional and expert work holds the potential for misconduct that can harm clients or the public. According to the traditional model of professional self-regulation, developed during the “golden age” of the professions in the mid-20th century, societies grant professional communities freedom from external regulation in return for their commitment to regulate their members’ conduct. Professions were said to cultivate distinctive ethical norms, socialize new practitioners, and engage in social control of deviant behavior. In light of dramatic changes in the professional world since that time, this essay reviews research on the legal and accounting professions in North America to assess the extent to which this traditional model still holds. The two professions continue to resemble the traditional model in some respects but diverge from it in others, and on some points, there is insufficient evidence to draw a conclusion. The traditional model of self-regulation is probably best viewed as an ideal type that can serve as a standard of reference, not as an accurate representation of social reality. This conclusion opens up new topics for research and opportunities to inform policy. In North America, as elsewhere, professional and expert work represents an important and growing segment of employment. The Bureau of Labor Statistics of the US Department of Labor (2010) projects that health care services, “professional, scientific, and technical” services, and educational services will together gain nearly 10 million new jobs between 2010 and 2020. The same three industries have shown especially strong recent growth in Canada as well (Uppal and La Rochelle-Côté 2013). In addition, across all industries, employment is expected to grow faster in occupations requiring master’s, doctoral, or professional degrees than in occupations requiring less education (Bureau of Labor Statistics, US Department of Labor, 2010). New developments in knowledge and technology have led to the emergence of new expert occupations. Aided by information technology and the globalization of markets, the extent of professional and expert influence is expanding as well, especially in occupations that serve large organizational clients. It is not surprising, then, that following a period of quiescence, the study of professional and expert work is currently experiencing a revival in North American social science (Gorman and Sandefur 2011). Research remains fragmented across a variety of disciplines and subfields, however – including the academic branches of professions themselves – and relatively little of this groundswell has been felt within the sociology of work and occupations. Yet new developments in professional work should hold considerable interest for sociologists of work, who can in turn contribute a valuable perspective to this growing interdisciplinary research conversation. The regulation and self-regulation of professional and expert conduct, in particular, reflects longstanding sociological interests and represents an especially compelling focus for sociological attention. An earlier generation of sociologists developed a theoretical model of professional selfregulation during the “golden age” of the professions (Freidson 2001; Galanter and Palay 1991) © 2013 John Wiley & Sons Ltd. in the mid-20th century. Since then, the professional world has changed in significant ways, making it important and timely to take a fresh look at this topic. For one thing, the concerns to which regulation responds have shifted. When most professional practices were relatively small and local, the need for regulation of professional work arose primarily from the risk that professionals would exploit the information asymmetry between them and their clients to the clients’ disadvantage (Goode 1957; Wilensky 1964). Today, given the rise of sophisticated organizational clients, a growing concern is that professionals may misuse their expertise on behalf of clients to the detriment of others – employees, consumers, investors, and the public as a whole. For another, demographic change, specialization, and globalization have weakened the ability of professional communities to regulate their members. The legal and accounting professions present especially interesting cases for examination. Both are traditional professions that had already established self-regulatory systems by the time of the “golden age.” Both professions are now prominent among the expert occupations that serve the needs of large corporate and governmental organizations. They now share (together with the financial professions) the potential to wreak widespread economic havoc, as recent financial scandals and crises have demonstrated. Yet, interestingly, the core ethical values of the two professions are at odds in ways that bear on their potential for opportunism toward both clients and the public. For lawyers, the fundamental ethical principle is “zealous advocacy” on behalf of the client (Granfield and Koenig 2003; Sarat 1998; Suchman 1998). For accountants, in contrast, it is “independence” from the client’s views and wishes (Gendron, Suddaby, and Lam 2006; Herron and Gilbertson 2004). This essay reviews recent research on North American lawyers and accountants with a twofold purpose. First, I assess the extent to which these professions continue to conform to the traditional model of professional self-regulation and highlight the pressures that may be pushing them toward other forms of regulation. Second, more broadly, I hope to overcome some of the barriers that have blocked the flow of knowledge and ideas between disciplines, subfields, and countries and to persuade sociologists of work – in North America and elsewhere – to turn their attention to the variety of engaging issues raised by current developments in professional and expert work. The traditional model of professional self-regulation The “golden age” sociology of the professions held that self-regulation was one of the hallmarks of professionalism (Cogan 1953; Wilensky 1964). Regulation of some kind is needed, in this view, because of the danger that those who possess expert knowledge will exploit the ignorance of clients for their own advantage. In return for a professional community’s commitment to regulate its members’ conduct, the surrounding society grants that community freedom from external regulation (Goode 1957). Three key components of professional self-regulation emerge from this literature: cultivation of distinctive ethical norms, socialization of new practitioners, and social control of deviant behavior (Goode 1957; 1961; 1969; Merton 1958; Wilensky 1964). First, the traditional view sees professions as relatively cohesive “communities within a community” that develop shared cultures, including standards of professional conduct that may diverge from the ethical norms of the broader society (Goode 1957; 1960; Van Maanen and Barley 1984). The distinguishing characteristic of professional culture was said to be a “service orientation” – the idea that professionals should place the interests of clients and the public above their own personal gain (Goode 1957, 1960, 1961; Parsons 1951, 1954). As professions mature, they formalize their standards of conduct in codes of professional ethics (Abbott 1983;Wilensky 1964). 492 Professional Self-regulation © 2013 John Wiley & Sons Ltd. Sociology Compass 8/5 (2014): 491–508, 10.1111/soc4.12152 Second, professional communities establish mechanisms for instilling their ethical standards in their new members, including both formal professional education and informal workplace socialization (Cogan 1953; Goode 1960). Professional socialization is unproblematic, in this view; individual practitioners dutifully internalize their profession’s service orientation and moderate their own conduct accordingly (Goode 1969; Parsons 1951). Third, according to the traditional model, professions exercise both formal and informal social control over individual practitioners’ behavior. Informally, professional communities offer status and social support to those whose behavior is exemplary, while shaming or shunning those whose behavior is unacceptable; formally, professional associations establish systems for monitoring and discipline (Freidson and Rhea 1963; Goode 1957; Reichstein 1965). Taken together, these three features form a coherent model of professional self-regulation. In North America, the dominance of this model as a schematic representation of social reality has never really been challenged. In the 1970s and 1980s, a new critical perspective questioned the traditional account of the reasons for the establishment of systems of professional self-regulation, arguing that they served primarily as means of advancing professions’ own interests in wealth, status, and power (Abbott 1983, 1988; Larson 1977). This perspective did not, however, question the effectiveness of professions’ control over their members and markets. Indeed, widespread suspicions that systems of professional selfregulation function as economic cartels fueled efforts to dismantle those systems in the 1970s and 1980s (Powell 1985) and remain alive today (Terry, Mark, and Gordon 2012a, 2012b;Terry 2013). When the vast majority of clients were individuals or small businesses and even larger corporations employed few professionals “in-house,” the problem of information asymmetry between professional and client was real and salient. Yet harmful effects, when they occurred, were scattered and limited in scope – seemingly the fault of individual “bad apples” rather than a sign of systemic problems – and did not give rise to support for external regulation. Meanwhile, powerful and culturally cohesive local and stateor province-level professional communities wielded substantial influence over the economic and status rewards available to individual professionals, who largely practiced alone or in small partnerships (Abel, 1986; Freidson 1960; Hall 1948). In these circumstances, the traditional model of professional self-regulation arguably offered an adequate conceptual fit to empirical patterns. In recent decades, important changes in the social context of professional work have brought new pressures to bear on the idea of self-regulation. For professions that serve the needs of businesses and other organizations, perhaps most important has been the shift in market power from professional to client. Huge multinational banks and corporations now offer fees on a scale that was previously unknown. They also employ staffs of “in-house” professionals who are well qualified to evaluate the work of outside experts. Older notions of longstanding client-professional relationships have faded away, so that professionals must compete to win and retain corporate business. Such clients enjoy a combination of sophistication and bargaining power that allows them to impose far-reaching controls on the performance of professional work, undermining professionals’ ability to make independent substantive and ethical judgments (Kronman 1993; Whelan and Ziv 2012). Indeed, critics have faulted both the legal and accounting professions for playing an enabling role in recent episodes of corporate misconduct that caused widespread economic hardship (e.g. Parker and Rostain 2012; Whelan 2007; Wyatt 2004). Thus, although the need to protect individual and small-business clients from unscrupulous practitioners remains (see, e.g. Abel 2006; Levin 2004; Schneyer 1997), a new need to protect the public from the concerted actions of professionals and clients is becoming increasingly clear. Professional Self-regulation 493 © 2013 John Wiley & Sons Ltd. Sociology Compass 8/5 (2014): 491–508, 10.1111/soc4.12152 Meanwhile, both internal and external forces have operated to diminish the self-regulatory capacity of professional communities. Internally, professions have become more fragmented and less cohesive. As a result of recent rapid growth and increased demographic diversity, professions are now much less culturally homogeneous than they were during the “golden age.” Professions that serve both individual and business clients have become bifurcated into distinct “hemispheres” by client type, with few social connections between them (Heinz and Laumann 1982; Heinz, Nelson, Laumann, and Sandefur 2006). Even more narrowly, as professional knowledge becomes more specialized, some professionals identify primarily with their specialty community (Mather and Levin 2012; Zeff 2003b). The globalization of markets and institutional fields has undermined local communities’ ability to offer economic and status rewards and penalties. Even large professional service firms are, to a substantial extent, an “enemy within”: They draw attention and commitment away from professional communities by providing alternative social collectivities that impose their own restrictions on professional conduct, backed up by their own positive and negative sanctions(Fortney 1996; Schneyer 1997). Externally, professional communities face increasing pressures from governmental and transnational regulators. Courts and government agencies have limited the ability of professional associations to impose formal controls that have the effect of restricting economic competition and remain open to the possibility of further “deregulating” measures (Competition Bureau of Canada 2007; Powell 1985; Zeff 2003a). As professional practice becomes less geographically bounded, professionals and firms are increasingly likely to be subject to the jurisdiction of multiple geographically based regulating agencies, at both the national and subnational levels; these regulators may impose conflicting requirements (Terry, Mark, and Gordon 2012a). Efforts at establishing international regulatory regimes are also underway (see Faulconbridge and Muzio 2008; Suddaby, Cooper, and Greenwood 2007). Finally, weakened professional communities are vulnerable to the incursion of ideologies and institutional logics from newer expert service occupations that lack a tradition of self-regulation, such as management consulting (Wyatt 2004). The dramatic changes that have occurred in the world of professional and expert work may have undermined the usefulness of the traditional model of professional self-regulation as a way of representing and understanding that world. In light of these changes, to what extent does the traditional model still apply to lawyers and accountants in North America? The remainder of this essay considers that question, examining the three components of the traditional model – cultivation of distinctive ethical standards, socialization of new members, and social control of deviants – in turn. Cultivation of distinctive ethical standards Ethical standards may be shared as informal norms and values or expressed in formal codes of professional ethics. Empirical research on informal professional communities and cultures is limited for both the legal and accounting professions in North America. Formal codes have received more extensive scholarly attention, especially from the academic branches of the professions themselves.