Transparency hurts - the press and partner profits
"When you are on the receiving end, particularly if you are running a business that is facing tough times, media coverage can feel like you're under siege..."
February 23, 2012 at 07:03 PM
3 minute read
I used to be very dismissive when hearing senior lawyers blame the press for creating an environment in which law firms pursue ever-escalating partner profits. But I'm a little less sure than I used to be.
On one level, it is an exercise in futility and blame-shifting to complain about the media's handling of profits. All businesses have benchmarks for success – a way of ascertaining the share price. And once you move past being a cottage industry, as law did years ago, a market is naturally created for financial information.
It also always struck me as utter hypocrisy when you find partners who greedily lap up reported information about their target clients but want to draw the line at their own firms' workings. And it's true that the single biggest factor in pushing law firms to chase higher profits per equity partner (PEP) has been the 15-year invasion of the Square Mile by more profitable US law firms. One way or another, City firms had to start hiking profitability.
And yet… and yet…. The longer you work as a journalist the more you become aware of the impact the simple act of publishing can have. When you are on the receiving end, particularly if you are running a business that is facing tough times, media coverage can feel like you're under siege.
And transparency can have its negative side. In positive terms, it helps to share good ideas, brings recognition of success and innovation and highlights poor ethical behaviour. But it magnifies things, good and bad, and can obviously contribute to inflationary pressures on industries in which it is applied.
In retrospect, at times the press could have struck a more restrained note on the pursuit of PEP, on occasion getting a little too 'rah rah rah' when profits were rocketing – and being ready to berate firms for not being 'tough' on performance – only to turn around and criticise the same firms for firing staff or having a poor work/life balance. Chasing profits is not always a good thing – it can breed short-termism and distort a business.
The metric of PEP obviously matters, but what matters more is a wider view of performance. For years, I've looked less at profits in isolation when assessing major law firms and more in the context of whether profitability reflects how the firm should be performing against its peers, business model and self-professed goals.
At Legal Week we've worked hard in recent years to take a more mature view of the industry we cover and show as much sensitivity as we can when covering difficult matters. But we would do well to remember that we don't always get that balance right, and the results can impact on people's lives.
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