“As a profession, if we are to be taken seriously, we need to move
to a sensible reporting regime that is based on real figures, and not
on those stage statistics that appear.” The words of an impractical
academic? A frustrated journalist rattling the cage of law firms’
secrecy? Try Guy Beringer, Allen & Overy’s senior partner, announcing the
public release of fully transparent, GAAP-compliant, detailed financials
for the firm,
including individual partner-by-partner compensation—a
potentially revolutionary development.
It gets better: Beringer insists the rest of the Magic Circle
do likewise, if they want "to be viewed as competent international businesses."
Lest we get ahead of ourselves, A&O’s admirable move comes on the
heels of their conversion to LLP status last year which, in the UK, entails
mandatory disclosure of these figures: But they’re not whining. To
the contrary:
David Morley, managing partner of A&O, said: “There is
a trade-off between the limited liability wrapper and disclosure and
we think it’s a fair trade-off. We hope we are setting the standard for
the profession.”
Additional coverage from The Lawyer is here and here; I’ve also requested a copy from A&O directly.
When other firms remove their cloaks, will we see untoward changes in the
profits-per-partner rankings? Does the Sun rise in the East?
Update as of 5:15 pm: Here’s the
press release announcing A&O’s results, which contains a severely
condensed income statement and balance sheet if you scroll down a bit. Highlights:
- The firm is focusing on productivity. While the total number
of lawyers was down slightly, productivity rose, permitting revenue
to grow by 2%. Combined with driving costs down by 1%, total
profit was up 8% and PPP was up 5%. - North America and China are viewed as the "key growth markets."
- Pro bono receives genuine resources: 50,000 lawyer hours, or £12-million
of billable time. - The largest single expense is "staff costs" at 41.2% of revenue-no
surprise whatsoever. - Second is "other operating charges," which (although they don’t say
so) is office rent and associated costs such as telecom and utilities. - No other expenses are material.
- Leaving a gross profit margin (before taxes) of 36.7%, which is handsomer
than even Microsoft territory.
