GCs and CFOs Not Always Working Together

Deloitte Financial Advisory Services recently conducted a poll and found that only 40% of respondents reported that there was a high degree of teamwork between their general counsels and chief financial officers. A quarter of respondents noted that collaboration between their GC and CFO was occasional, and 3% said collaboration was non-existent.

In spite of this data, there is a growing sense that a high degree of collaboration between GCs and CFOs “should be the rule and not the exception”, particularly in a tough economy. However, “collaboration tends to be episodic as opposed to ongoing and routine.” This coming from David Williams, CEO of Deloitte Financial Advisory Services, in an interview with Corporate Counsel’s  Shannon Green for a December article.

Green goes on to mention the survey indicated respondents disagree on when GC and CFO collaboration is most important. While 27% feel it is most needed “during an economic downturn”, 34% indicated teamwork should be high “regardless of market conditions”. 25% of respondents felt collaboration during times of “business growth or expansion” takes priority. Williams continued to say that the role of the GC needs to continue to evolve in terms of their strategic management and leading the company. GCs and CFOs share many of the same responsibilities in terms of risk management, protection and compliance, hence the need for more collaboration.

When there is a high level of collaboration, a company is much better able to handle risk and also proactively prevent it. Corporations need to more readily utilize the strengths of their general counsels, as most often what makes them good is having a broad impact across business units and the ability to collaborate with their leaders.

Lateral Moves and Mergers Will Continue to Rise in 2012, Experts Say

As we head into 2012, all indications are it will be another strong year for law firm mergers and lateral moves. On the whole, the industry still finds itself in an interesting place as the economy recovers—caught between careful spending and expected growth. Now almost five years out from the recession, firm leaders are eager to break out yet still hesitant to invest in young associates with little or no experience. And as demand for legal services rebounds, clients and consumers are looking for quality service without having to pay for (or wait on) the training of new associates. Thus, firms all over are being forced to take proactive steps to expand and stay ahead of the curve.

On the one hand, lateral hiring of candidates with established practices, experience and strong books of business has become the new model for growth and efficiency. Not only is this helpful for firms looking to rejuvenate lagging practice areas, but it also allows for quick and successful expansion into new regions, markets and profit streams. According to a September survey released by Altman Weil, 91.6% of law firms indicated they were making efforts to expand laterally in 2011, and industry experts expect the trend to continue in 2012. A January 3 JD Journal article cites Thomas Clay, an author of the Altman findings, who notes “the increase in lateral hiring is due to the need for lawyers with plenty of business,” and “not the need to fill (young associate) jobs that were lost during the recession.”

Therein lies opportunity for experienced attorneys and dilemma for young law grads. Yet as the hiring landscape continues to adapt, the outlook remains bright. Overall the industry has fared better than most in terms of jobless claims and profit margins, and the fact that firms are now eagerly looking to hire (albeit laterally) is an encouraging sign long-term.

At the same time, finding the right candidates with the requisite experience and skills (in corporate or elsewhere) is not easy. In the journal’s interview with recruiter Larry Mullman of New York’s Major Lindsey & Africa LLC, Mullman notes firms may not be able to fill certain practice areas because fewer and fewer attorneys have been able to  acquire the kind of transactional business experience firms want. He goes on to say this is most often true with Corporate/Mergers & Acquisitions, but particularly so “in these uncertain times”, as “there are not many qualified partner candidates with the kind of business experience that makes sense. Transactional work, whether in corporate or real estate, is soft.”

The article goes on to note this is due in large part to enduring volatility on Wall Street. As noted by DLA Piper’s managing partner Terry O’Malley, “When the upside for GDP predictions is 2.5% and the stock market can move 2 or more % in a day, that creates turbulence in capital markets which makes it difficult for transactional practice.” Even so, DLA Piper added 110 lawyers in the U.S. in 2011 alone, and is still looking to expand.

The current state of the economy is such that lateral movements are particularly attractive and logical for both firms and candidates looking to make a move. Yet the key lies in matching one with the other, and in finding a place for the many young lawyers seeking employment.

However, increased lateral movement also means a shifting and often uneven balance of power. Many firms are losing their top legal talent, and in some cases, entire practice areas. Thus firm leaders are being forced to make quick and hard decisions in order to ensure their own survival, let alone future growth.

According to Jennifer Smith’s January 20 Wall Street Journal article Stark Choices for Lawyers–Firms Must Merge or Die, “At least 60 mergers occurred in the U.S. and abroad last year, the highest level since 2008 and a 54% jump from 2010”–a trend industry experts expect will continue to rise in 2012. Smith notes this is due in large measure to the fact that following the recession, increased billing rates is no longer a viable option for growth, as clients gained the upper hand during the downturn of 2008. Thus smaller firms are joining forces, and larger firms are quickly and easily expanding into new practice areas with “ready-made regional offices” in order to better serve client needs. Moreover, size and resources are not only attractive for firms looking to bring in new business and retain top talent, but also for laterals looking to make a move.

All this to say, further consolidation and increased lateral movement is expected for the foreseeable future. As lateral hiring continues to rise and the balance of power continues to shift, more and more firms will look to merge to secure future survival and growth.

Legal Sector Cuts 1,100 Jobs in December

Following a promising summer, legal employment in the U.S. declined by 1,100 jobs in December, despite initial projections of a loss of 1,800 jobs. The loss of 1,100 rivals September’s loss of 1,200, and continues a downward trend since July’s momentous gain of 4,100. Overall, there has been a net gain of 1,000 jobs since that time, yet this was a sour note to close the year as 3,100 jobs have been lost over the past 5 months. It remains to be seen what effect this will have on jobs moving forward in 2012.

Can You Afford Law School? Law Dean Says Think Twice

Can today’s young lawyers and law students actually afford a law degree? With law school applicant pools growing and many firms still stuck in cutback-mode, this question has become more important and timely than ever.  In the last few years, schooling has been an attractive option to many in hopes of waiting out the recession, but the reality is that less jobs are available amidst a cloud of increased competition, tuition and short-term uncertainty.

In a recent paper by University of Louisville Law Dean Jim Chen, (A Degree of Practical Wisdom: The Ratio of Educational Debt to Income as a Basic Measurement of Law School Graduate’s Economic Viability) Chen analyzed the amount of debt that a law student can afford after graduating from law school.  As noted by Karen Sloan in her recent article for Law.com, applicants often fawn at the high-paying salaries offered by top firms without considering the long-term realities of debt.

While Chen acknowledges many factors play into the decision to attend law school, his baseline for measuring financial viability is simple. He maintains that students should be able to afford a home after graduation, while also being able to pay back their debts incurred.

As noted by Sloan, in looking at debt standards set by mortgage providers, Chen concluded that “law graduates need to earn three times their law school tuition annually” to achieve “adequate” financial viability. In other words, this is what  Chen defines as the bare minimum students need to make to justify the decision to attend law school. Moreover, this assumes students are not entering school with other outstanding debt, which Chen terms as “conservative” at best.

To put this into real terms, young graduates of the most affordable schools with tuition around $17,000 per year would need to earn more than $50,000 per year, while graduates of more expensive programs at $34,000 each year would need to earn more than $100,000 annually. The highest echelon of programs would require students to earn around $150,000 per year.

In large measure, this does not line up with what graduates are earning. Sloan notes, “According to the National Association of Law Placement, new law graduates earn, on average, $68,500. That means many would be unable to purchase a home and repay their loans, according to Chen’s analysis. Lenders generally frown on educational debt that represents more than 8 percent to 12 percent of the borrower’s monthly gross income, he wrote.”

At the same time, every student’s situation is unique, and money is certainly not the only motivator or measure of success. However, with Chen’s stature as law dean for a prominent university, his findings are clearly well-intended and hard to ignore.