Are governance practices employed by professional service firms equally effective in preventing professional-client misconduct for professionals at different stages of their career? Drawing upon professional-agency theory and the literature documenting professional career patterns, we develop a multilevel theoretical model to answer this question. We test our model in the empirical context of the Dutch legal profession, using firm-level survey data on 142 law firms and individual-level archival data from the 2994 lawyers working for these firms to explain 97 formally adjudicated complaints of professional-client misconduct committed by individual lawyers registered with the Amsterdam Bar Association. We find that the ‘orthodox’ distinction between informal behavioral and formal outcome-based governance practices is too course-grained to receive empirical support, and that firm-level governance practices only reduce professional-client misconduct when they are specifically targeted at the career stage of the lawyers employed. Our findings not only allow us to develop a finer-grained version of Sharma’s professional-agency model, but may also be practically useful in developing firm-level governance practices targeted at different strata of professionals.

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Tournament-like promotion systems are the default in audit firms, which are generally internally owned professional partnerships. While awarding promotions in a contest-like fashion stimulates contestants' motivation and productivity, it may also upset an organizations' ethical climate and trigger ethically adverse behaviors. Since nearly all research on promotion tournaments in management has been conducted in public firms, little is known about how these incentive systems operate in professional partnerships. In this study, we analyze how the perception of the two controllable design parameters of promotion tournaments-the relative pay spread between winners and losers and tournament breadth in terms of the number of contestants that compete for a prize-affects audit firm behavior. Survey results provide evidence that the tournament's perceived breadth prompts adverse behavior, as it does in public firms. Contrary to conventional wisdom, however, the perceived pay spread has no significant effect on adverse behavior, but triggers desirable behaviors instead. Our study suggests that promotion tournaments indeed provide powerful incentives, but also that understanding the unintended consequences of these incentives on organizational ethical climates and behavior requires tournament theory to be contextualized when it is applied in new settings like internally owned professional partnerships.

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