It’s Am Law 100 season. My former colleagues at The American Lawyer have just published their biggest issue of their year, the annual scorecard of the 100 top grossing US law firms. This much-anticipated report has managed to survive three decades of criticism and consternation and remains the financial benchmark in the legal market.
But a recent set of lamentations from the legal academy has lead me to ponder where the profession would be if The Am Law 100 had never become more than a mote in Steve Brill’s eye. (To follow the latest critique of how-the-profits-per-partner charts careened into pernicious-short-term law firm behavior, please see both a powerful recent essay from the Harvard Center on the Legal Profession and a challenging new article in the University of Southern California Law Review by Jonathan Molot of Georgetown Law School.
It is undeniable that in a bid to maintain or maximize their annual financial results, some firms have failed to invest in training and technology, measured performance poorly, and skimped on public service. Those are profound failures, embarrassments to a profession that is charged with helping to maintain the rule of law in our republic. Whether the solution lies in reinventing the law firm capital structure to create “permanent equity” and permit outside investment as Molot suggests, or cultivating an inspired and balanced new generation of law firm leaders as Harvard suggests, are fair questions best left for another, much longer day. My one caution is to beware promised cures that may be worse than the disease itself.
My question is simpler: where would we be in 2015 without the influence and presence of The Am Law 100 and its profit per equity partner (PPP) charts? We still would be, as Saint Paul put it in a different context, looking through a glass, darkly. The data wouldn’t have disappeared; it would just be in different hands.
Consider the possibilities. This week there would be a surge to the CITIlawfirm.com web site for the publication of the annual CITI Law Firm Financial Report, a sober look at the finances of 180 or so firms of uncertain size or provenance. Because by custom, Citibank does not name the firms who participated in its annual survey, we’d be entertained by the efforts of The Wall Street Journal or Financial Times, to identify the firms who were on the list and how well they’d done. This might even be the year for another round of harrumphing stories about Citi’s vague definitions of equity partners or another occasion to ask arch questions about whether readers can really trust the numbers of a bank that lends to law firms that sometimes go bump in the night. By now Citi would have spawned spin-offs and in another month Wells Fargo would have its competing charts. (Wait, that actually happened.) And at some point, Thomson Reuters would push out its annual Peer Monitor reports, that would provide averages for its participant pool but stop short of the cleansing sting that comes with naming names.
Public discourse about all this would look a bit like a fan dance with some law firms coyly confirming a few numbers when it suited their tactical need to flash a little leg. Now, one might naively ask, why would law firm partners, leaders, and chief operating officers ever give away bits of confidential information? In self-defense. With no public benchmarks or transparency, the firm-by-firm financial data would be in the hands of skillful legal recruiters and consultants who, after several decades of practice, would have built elaborate databases of firm revenues and pay packages. It’s a small stretch to imagine an age when they would use this data sotto voce to gather potential recruits or, perniciously, roil the market. Inevitably an information market would have developed in which reporters, consultants, recruiters, and bankers traded information about the finances of the CITI 180 or so.
None of this takes into account the advent of the bloggers and the British press. Surely they’d be in the mix. But it’s unclear whether they’d have the resources to pry open the finances of a couple hundred U.S. law firms. Indeed in the era of the CITI 180 or so, the annual report on the mandated financial filings in London would be an occasion for chortling in New York.
This counterfactual world might be an easier place for law firm management. There would be no annual public accounting and no fear that some attractive lateral might not take a meeting because the Am Law list ranked their firm at number 84 down from 81. The plague of short-termism wouldn’t have disappeared; it would just be harder to see in the shadows. And this Am Law-free world wouldn’t have reduced the importance of acting for the long term.
For the last 30 years, well-led law firms would have gone about their business. They would have expanded to follow clients whose local and regional businesses became national and then global. They would have benefited as they saw capital break over boundaries and governments increase their regulatory oversight. They would have grimaced as their clients developed more sophisticated and hard-bargaining legal departments, and their partners, lured feverishly by other firms determined to grow, edged toward a free-agent mentality. Successful firms would have acted on these trends: Latham & Watkins and Jones Day wouldn’t have stayed at home patiently tending to the dwindling numbers of Los Angeles bankers and Cleveland industrialists.
Of course the Am Law 100 had—and continues to have—an impact on the legal market. In physics it’s called the observer effect. The publication of financial data ended the assumption that all major law firms and their lawyers enjoyed similar levels of success. It brought a dollop of transparency to a market that otherwise was shrouded in clubby legend and unexamined behavior. And, alas, the publication also made it acceptable for some lawyers to embrace greed as an end in itself. It is a short step from profits per partner to, as Jon Lindsey at Major, Lindsey & Africa coined it, PPM, or Profits Per Me.
Without the Am Law 100, the legal market would have retained more mystery and more misinformation. It would have appeared less grubby. But change was afoot and the responsibility for the sad consequences, such as they are, belong to the decision makers. Information is what it is. What leaders do with it is the more interesting question. I will no doubt regret this usage, but if I may, PPP doesn’t ruin a profession, professionals do.