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LAW PUNDIT Saturday, February 28, 2009 2/28/2009 11:34:00 AM [Home]
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Economic Recovery : Are You a Part of the Solution, or Are You a Part of the Problem? Latham & Watkins as a Negative Example of Recovery Policy
As can be read in numerous news sources (we refer here to the AmLaw Daily), Latham & Watkins is to lay off 190 associates and 250 non-legal staff - while "Latham's 550 strong partnership will be unaffected by the cuts", apparently under the motto that it is the other guy who should make the sacrifices necessary to cope with the current economic situation.
This is not the first time that the Latham firm has done this kind of thing. It also laid off people in the 1990's.
Perhaps it is time that society began to put severe financial and tax penalties on these kinds of irresponsible employment policies. If companies viz. law firms are not responsible for their employees, who is? Well, if it is the government, then very high mandatory company and law firm payments for unemployment insurance for their employees should be imposed.
According to the Global 100 law firms (see Law.com), Latham & Watkins ranked 19th in the world among law firms in terms of profits per equity partner at $2,270,000 per partner based on gross revenues of $2,005,500,000. Due to the current economic situation, profits per equity partner and gross revenues, according to the AmLaw Daily, dropped as follows in 2008:
If we assume that the 190 associates to be laid off earn on average let us say $200,000 a year and the 250 non-legal staff earn $68,000 a year, that results in an annual payroll savings of $38,000,000 for legal staff and $17,000,000 for non-legal staff or about $55,000,000 per year. Those figures are hypothetical since an outsider can not know the actual salaries of the people affected, but the numbers should be somewhere in the ball park.
Question: For the above hypothetical numbers, how much of an annual profit cut would the 550 partners at Latham each have to take to RETAIN all of these people in their jobs? What sacrifice would the law partners at Latham have to make to not throw their colleagues out on the streets, where YOU, as a taxpayer, ultimately have to take care of them and be their bailout - if they do not find other work, and they may not for quite some time, in a current economy marked by legal layoffs.
ANSWER: We just divide the $55 million by 550 = $100,000 per partner.
In other words, rather than each of the 550 partners at Latham & Watkins taking a $100,000 pay cut out of their own profit of $1.8 million per equity partner, dropping their individual profit to $1.7 million and thus doing their share of sacrifice for economic recovery, 440 people and their families - with far fewer resources at their disposal - are being thrown to the wolves.
Are Latham & Watkins part of the solution? NO. They are part of the problem.
Permalink : Andis Kaulins : 2/28/2009 11:34:00 AM
Economic Recovery : Are You a Part of the Solution, or Are You a Part of the Problem? Latham & Watkins as a Negative Example of Recovery Policy
As can be read in numerous news sources (we refer here to the AmLaw Daily), Latham & Watkins is to lay off 190 associates and 250 non-legal staff - while "Latham's 550 strong partnership will be unaffected by the cuts", apparently under the motto that it is the other guy who should make the sacrifices necessary to cope with the current economic situation.
This is not the first time that the Latham firm has done this kind of thing. It also laid off people in the 1990's.
Perhaps it is time that society began to put severe financial and tax penalties on these kinds of irresponsible employment policies. If companies viz. law firms are not responsible for their employees, who is? Well, if it is the government, then very high mandatory company and law firm payments for unemployment insurance for their employees should be imposed.
According to the Global 100 law firms (see Law.com), Latham & Watkins ranked 19th in the world among law firms in terms of profits per equity partner at $2,270,000 per partner based on gross revenues of $2,005,500,000. Due to the current economic situation, profits per equity partner and gross revenues, according to the AmLaw Daily, dropped as follows in 2008:
"Profits per equity partner dropped 21 percent from $2.27 million to $1.8 million while revenues fell 4 percent from just over $2 billion to $1.9 billion."The AmLaw Daily calls this loss "dramatic". By our calculations, the drop in profits would have dropped Latham & Watkins from 19th to 28th place on the Global 100 profits per equity partner list - hardly a "dramatic" drop (28th and not 29th because position 19 would then be vacated).
If we assume that the 190 associates to be laid off earn on average let us say $200,000 a year and the 250 non-legal staff earn $68,000 a year, that results in an annual payroll savings of $38,000,000 for legal staff and $17,000,000 for non-legal staff or about $55,000,000 per year. Those figures are hypothetical since an outsider can not know the actual salaries of the people affected, but the numbers should be somewhere in the ball park.
Question: For the above hypothetical numbers, how much of an annual profit cut would the 550 partners at Latham each have to take to RETAIN all of these people in their jobs? What sacrifice would the law partners at Latham have to make to not throw their colleagues out on the streets, where YOU, as a taxpayer, ultimately have to take care of them and be their bailout - if they do not find other work, and they may not for quite some time, in a current economy marked by legal layoffs.
ANSWER: We just divide the $55 million by 550 = $100,000 per partner.
In other words, rather than each of the 550 partners at Latham & Watkins taking a $100,000 pay cut out of their own profit of $1.8 million per equity partner, dropping their individual profit to $1.7 million and thus doing their share of sacrifice for economic recovery, 440 people and their families - with far fewer resources at their disposal - are being thrown to the wolves.
Are Latham & Watkins part of the solution? NO. They are part of the problem.
Permalink : Andis Kaulins : 2/28/2009 11:34:00 AM
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