How Influence Works in Canada
Yesterday morning I attended a video conference with the CEO of a promising startup in the AI space. The other attendees were two lawyers from one of Canada’s most prestigious law firms in Toronto. According to Statistics Canada there are more than 49,500 law firms in Canada, but the profession is dominated by just 7 firms. The average annual billings of the lawyers from these top seven firms was almost one point four million dollars – in 2017. Our one hour meeting – plus prep time – couldn’t have been cheap. As if to justify the fee, one of the lawyers skillfully dropped the name ‘Andreesen’. Marc Andreesen is the founder of perhaps the most important private equity firms in Silicon Valley.
To give you some context, consider that the two lawyers combined generated about 20 times as much revenue annually, as the 10 person startup represented by the CEO. The two lawyers themselves may not have all that much influence, but the leadership of their firms do exert a great deal of influence as ‘business experts’. Together, the top 7 firms in the country represent zero point one four percent of all law firms in the country. The leadership of those 7 firms exert an outsized influence. Similarly, the top 7 accounting firms represent only zero point one seven percent of all accounting firms in the country. A couple of generations ago, the leaders of these top firms may have lobbied governments on behalf of their clients.
Today though, their firms are paid enormous sums as management consultants. Instead of lobbyists, they have become consultants. While they invariably argue against wasteful ‘red tape’ and government regulations affecting their largest clients, they have convinced provincial and territorial governments to outsource their regulatory responsibilities to the professional bodies themselves, which are controlled by the largest and most influential firms. In our view this has resulted in both increased regulatory complexity for practitioners, and higher compliance costs for their small business clients. Inevitably, the justification for these restrictions is the need to protect the public from the ‘unethical’ practices of unregulated practitioners.