Notes there is increasing concern that confusing figures from commercial law firms' financial results is obscuring poor performance - encouraging firms to focus on short-term gains at the expense of longer-term strategies. States numerous measures are used to compile league tables but some lawyers and analysts say this reporting is being used to fill specialist legal press without adding any value to client or law firm management teams. Notes the argument by Tony Williams of Jomati that while profits per equity partner (PEP) is the most commonly looked at figure, it is also the most easily manipulated. States PEP is becoming anathema to law firms, with Allen & Overy campaigning against its use and urging magic circle firms to adopt greater transparency in comparative figures. Notes the core point is that while there are numerous measures, law firm results do not compare like with like. Goes on to consider problems with PEP and simpler comparative figures, such as revenue per lawyer and profit per fee-earner. Concludes that for now, the fashion for ranking by PEP is strong. Highlights Peter Gamson, of Grant Thornton's assertion that part of the rationale for this is that law firms are playing to two audiences - the specialist press and law firms' own partners. Concludes with Mr Gamson's observation that in the absence of longer-term incentive planning or share ownership then firms are left with one mechanism for getting partners to think it is worth staying with the firm - keeping their annual profits high.
Jonathan Ames
Times, July 29, 2010, Law 67
Subject: Legal profession
Keywords: Equity partners; Financial performance; Law firms; Profits; Transparency
Companies referred: Allen & Overy; Grant Thornton; Jomati