Managing Legal
The law firm of Milbank, Tweed, Hadley & McCloy recently announced that it was raising the annual salaries of its first year associates to $190,000. Other large law firms are doing the same.
Instead of a business-like, matter-of-fact, decisive refusal to pay lawyer rates for the work of brand-new law graduates who are lawyers in name only — many clients who sign off on the legal bills of law firms participating in this $190,000 move … are feeling upset.
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So writes Caroline Spiezo in an article of the above title appearing last week in the journal Corporate Counsel:
“Corporate Counsel reached out to a number of in-house leaders following Milbank’s announcement to gauge their reactions. Many opted to remain anonymous, but all displayed strong feelings about this development. Here are their responses, some of which have been lightly edited for clarity and length.
“Mark Smolik, general counsel and chief compliance officer at DHL Supply Chain Americas:
“’In the open market, there is little difference between a company raising prices for its goods or services and a law firm increasing compensation for its people. It is a cost of doing business. Those costs are typically passed along to customers in the form of higher prices or billing rates. It’s up to the purchaser of those goods or services to evaluate whether the prices charged are commensurate with the value delivered. If a law firm feels it necessary to pay first-year attorneys an extraordinary $190,000 to remain competitive, then that is their decision.
“‘Just don’t ask for me to pay for it.”
A legal operations director:
“’… I find it unfathomable that not just one but many law firms believe that a first-year associate coming out of law school would command such a high starting salary.
“‘The tone deafness is astounding. We as purchaser of legal services keep asking our firms to bill based on value because that is what we want to buy, not hours. They respond by raising rates across the board. It is no wonder that the largest-growing segment in the legal industry over the past few years has been the role of in-house counsel. You can keep living in your ‘reality distortion field’ and pay a first year associates $190,000. You certainly will attract lawyers to come work for you but we are firing you everyday, you’re just too busy playing #metoo to notice.’ ”
And so it went with a couple more in-house folks voicing their “strong feelings”.
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Recall what that journal author discovered:
“Many opted to remain anonymous, but all displayed strong feelings about this development.”
As someone who began my professional life beset by a lawyer’s blind spots on management and cost control, I can testify firsthand: Lawyers are rarely the best folks to negotiate with other lawyers where you want the highest management and cost control standards to prevail.
I recommend that P&L-minded executives hold their corporate law functions to the same high management and cost control standards expected of all the other corporate functions.
Until CEOs, COOs, and CFOs step in to make their lawyers accountable in this way, law firms expecting to pass on to clients such ridiculously inflated cost structures are probably not “tone deaf” at all.