Friday, March 24, 2006

Have big law firms stopped making equity partners?

An almost throw-way line in today’s AFR sent my head spinning:

“The attraction of being a partner at a big firm is a lot less than before”, says [University of Western Sydney professor of management John] Gray. “Now existing partners aren’t admitting extra lawyers to be equity partners. All you get is a pay increase.”*

If this is indeed the case, it has sure been kept quiet. Bringing up the drawbridge, forever, on new equity partners is of course a classic boomer move – coldly tactical, and betting the house on Xer passivity rather than Xer enragement.

For readers who don’t understand the economics of large law firms, here’s a quick lesson. Partners earn most of their drawings (typically $1m+ annually), by effectively “owning” non-partner lawyers, aka revenue-earners. Through charge-out arbitrage, it’s a relatively effortless way of making money.

So what’s in it for non-partner lawyers? Traditionally, there was always the light at the end up of the tunnel: becoming an equity partner oneself, after ten or so years of de facto slavery (i.e. receiving as salary about 10% of the revenue one earns/bills, even after overheads are taken into account).

I’d be interested to know the reactions, to this turn of events, of any non-partner lawyers out there . Talk about goalpost-shifting, mid-game. One known, and unsurprising, reaction (apart from just walking out) of non-partner lawyers caught on the wrong side the drawbridge is cited by Gray: seething resentment by lawyers against burgeoning numbers of non-revenue earners:

[Many young self-employed barristers who have left large law firms] say “I don’t want to work long hours to employ a personnel clerk.”*


In other law news, today’s Oz exhumes a stupidly-handled-at-the time story from two years ago. And it ain’t smelling any fresher today. Hint to Chris Merritt: these junkets are either kosher tax-wise, or they aren’t. As they currently seem to be indeed 100% deductible (in defiance of conventional tax law precepts, IMO), then the *real* story is why the ATO allows lawyers to get away with this. It really has nothing to do with lawyers' professional bodies, unless these are actually organising the junkets.

Finally in law news, I’ve added an update to a recent post on the gilded generation of the 1961-born, which includes plagiarising, no-hoper (but protected boomer) magistrate Jennifer Rimmer.

* Elizabeth Kazi, “There's no under-age at this bar” AFR 24 March 2006 (no URL)

Comments: Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?