Law firm ownership interests adjusted!
Mayer Brown unloaded 45 partners! 10% of their partners! Why? According to an internal memo published by Wall Street Journal, the reason was to increase their profits per partner, a standard they say is important in competition for laterals and law school grads.
Their standing in the AmLaw survey is similar to stock prices and P/E ratios. But, one comment from a client suggests that such rankings have no bearing on clients … and that it is "moronic" to kick out talented lawyers.
But, is it wrong for some partners to seek a larger share of the equity pie by rearranging the ownership? Is it wrong, or greedy, for the law firm to place more emphasis on areas of practice that produce more revenue and more profits? Again, we mirror our clients who seek to improve their profits and their equity value … If they are not greedy, why should lawyers be called "greedy?"
The Business of Law® and LawBiz® Management are about running your business, the practice of law, more effectively, more efficiently and more profitably. Are lawyers "greedy" because they want to earn more, to provide more for their families? I think not. To some degree, Mayer Brown’s rationale, to be more competitive, is a sham and for public consumption. That may happen if they increase their profits per partner. But, bottom line, as one of the top ten law firm revenue producers, almost $1 billion, they are seeking to be as profitable as others in this elite club of law firms. And leverage is one of the fastest ways to get there. Is it the only way? No. Is it the most painless way? Maybe, maybe not. I think Mayer Brown’s public image, and long term profitability, may have been better served by finding another path. I don’t know enough to make a suggestion, but I do know t hat not every business decision is without pain.
There are the macro aspects (the law firm business), discussed here, and then the micro (the personal impact on the selected individuals) aspects. I only trust that the conclusion in the firm’s internal memo is correct: "That all the lawyers involved are great lawyers and will land on their feet." (paraphrase) While earning good money, the question for these individual lawyers is: Did they save enough to be independent or did their standard of living increase over the years to match their income? What severance package did they receive? Did they receive a pro rata share of the goodwill of the firm? Will their ego be able to gracefully handle the psychological impact of being told "you’re not wanted here." These are qusetions better left to others at another time.Tags: Cash Flow - Finances
Categorized in: Cash Flow - Finances