Legal News

Reveal Revenues? The Managing Partner?s Dilemma

By Ashby Jones

Big law firms often move in a herd. A single firm raises associate salaries or announces its year-end bonus, and others follow fast, sometimes in a matter of hours.

But one issue, it seems, continues to split the firms: whether to peel back the curtain on their annual financial figures. The contrast was recently put into sharp relief; Latham & Watkins last week released to the media its financial information. Latham had a good year — boasting gross revenues for 2007 that topped $2 billion. As soon as Latham announced, however, eyes turned to Skadden, whose hold on the highest-gross-revenue spot suddenly seemed under threat. Skadden declined to release numbers. Meanwhile, thelawyer.com on the other side of the pond reported provisional figures for Skadden of $2.02 billion, with apparent attribution to a “Skadden insider,” and a person familiar with the situation has told us the figure broke $2 billion.

(Update: There’s apparently another name to add to the $2 billion club: DLA Piper, which, according to the firm, had gross revenues in 2007 of $2.1 billion, with profits-per-partner of $1.28 million.)

As private partnerships, law firms are under no obligation to share. Still, over the past several years, an increasing number of big firms have decided to open the books in late January or early February to inquiring minds, namely reporters. Publications in the U.K. now roll out salary information for lots of U.S.-based firms early in the year. And the American Lawyer magazine is going to print its best estimates in May, these firms seem to figure, so might as well get the news out there.

Consider WilmerHale. According to co-managing partner William Perlstein, two years ago the firm’s executives decided that giving the numbers out widely made the most sense. “It gives us the ability to make sure the numbers are accurate,” says Perlstein. (For 2007, the firm says it brought home $944 million in gross revenues.)

But Perlstein says the move was an acknowledgment of what WilmerHale and other firms have become: global institutions. “We’re not publicly traded, but we’re not the small number of people sitting around a conference room table that we were several decades ago,” he says.

Others, like Rodgin Cohen at Sullivan & Cromwell, which keeps its numbers private, haven’t turned that corner. “A publicly-held company has an obligation to shareholders,” says Cohen, “but we’re a private partnership. We don’t think our financial information is relevant to anyone else.”

Law Blog readers, put yourself in the shoes of the top dog. What do you do?

Full post as published by Law Blog - WSJ.com on February 14, 2008 (boomark / email).