Cash-register management

Recommended reading – Steven Harper’s article in this month’s American Lawyer about the results of the midlevel associates survey.  Money quote:

The prevailing business model has distorted some concepts of value and jettisoned others. At most big firms, productivity equals billed time, without regard to the efficiency of the worker or quality of the end product. Meanwhile, anything that can’t be measured—mentoring, creating a sense of community, delegating important client relationships to young attorneys, and encouraging balanced lives that make better lawyers—gets discounted or lost altogether.

That’s the real theme permeating midlevel associate dissatisfaction. Running big firms according to metrics aimed at increasing short-term profits is deceptively objective and relatively simple. But it risks ignoring important things that can’t be quantified. […]

As a result, behavior that would enhance institutional stability and intergenerational transition yields to the self-interested development of portable books of business. Add enough laterals, and any partnership can quickly lose itself. Client-filled partner silos don’t promote the shared identity that provides a sense of community. Relying on current profits to be the glue that holds everything together can quickly make a strong firm fragile. Just ask lawyers who once worked at Heller Ehrman, Howrey, or, for history buffs, Finley Kumble.

Among large-firm equity partners, a revolution of rising expectations has continued for two decades. Recessions come and go, but somehow average equity partner earnings have trended skyward as associate satisfaction has tanked. With new attorneys flooding the market, where’s the incentive for those who reap staggering rewards to reconsider the human impact of their business models, especially on the youngest and most vulnerable?

[…]  The question for large firms is whether they can continue to attract the best and the brightest even when top recruits truly understand the work they’ll do, the culture of short-term thinking they’ll endure, and the failure most will encounter in their bids for equity partnership.

The tragedy, as I see it, is that the people most responsible for creating the winner-take-all law firm culture, and most capable of correcting it, will read this and either (i) not care (“I’ve got mine, Jack”), because worrying about the institutional legacy is for chumps, or (ii) not recognize themselves, because they believe their own recruiting hype and would vehemently deny pursuing short-term profits über alles or asset-stripping the firm before they retire.

Crony capitalist of the week

The dean of the bank M&A bar speaks to the Financial Times:

“If the phrase ‘height of stupidity’ has any meaning, it would be shown if they nationalise a US bank,” said Rodgin Cohen, chairman of law firm Sullivan and Cromwell, who has advised on many of the past year’s biggest bank rescue deals and recapitalisations.

Mr Cohen stressed that the nationalisation of a large global bank had never been tested and the unintended repercussions of such a move could be severe, particularly in relation to any of the bank’s foreign subsidiaries. He favours a plan that would infuse banks with more capital and extract bad assets from their balance sheets as quickly as possible, to boost confidence in the institutions.

“Given time, these institutions have enormous earnings capacity,” he said. “If you start to take out these bad assets, we’ll start to see confidence rebuilt.  It can turn around, and it will turn around.”

And when it does turn around, we want to make sure our guys are still in charge so they can privatize the gains and share them with us.

Looks like the rent-seekers have found their mouthpiece.

Dismantling the torture state

From yesterday’s executive order on interrogations:

From this day forward, unless the Attorney General with appropriate consultation provides further guidance, officers, employees, and other agents of the United States Government may, in conducting interrogations, act in reliance upon Army Field Manual 2-22.3, but may not, in conducting interrogations, rely upon any interpretation of the law governing interrogation — including interpretations of Federal criminal laws, the Convention Against Torture, Common Article 3, Army Field Manual 2-22.3, and its predecessor document, Army Field Manual 34-52 — issued by the Department of Justice between September 11, 2001, and January 20, 2009.

With a stroke of the pen (and a whole lotta commas), Obama knocks down the Federalist Society’s entire pseudo-scholarly edifice, and fixes the beginning and end of the 2,688-day Lawless Interregnum.

Oh no you don’t

This morning’s Financial Times reports that Bank of America cancelled a planned $3 billion sale of a portion of its shareholding in China Construction Bank after high-level objections from Beijing.  BofA bought a pre-IPO stake in CCB in June 2005, acquiring more shares in June of this year, and by the end of September BofA’s $4.9 billion investment in CCB was worth $14.5 billion.  BofA exercised a call option in November, paying about $7 billion to increase its CCB shareholding from 10.75% to 19.13%.  The lock-up on BofA’s pre-IPO position expired in October, and the plan apparently was for BofA to sell enough CCB shares to bring its total stake below 17%.

The FT article — on the front page of the print edition, above the fold — is full of ominous (and anonymous) talk about authoritarian Chinese disregard for the sanctity of contract:

The precise reason for the 11th-hour abandonment remains unclear, but dealmakers in the region believe that the Chinese government was unhappy about the timing of the share sale, the first such attempted divestment by a foreign investor following the expiry of a lock-in period.

The share sale could have triggered a fall in CCB’s share price just as Beijing is trying to garner support for its largest banks and arrest a stock market slide.

Foreign financial institutions, including Goldman Sachs, Dresdner Bank, Temasek and Royal Bank of Scotland, hold shares in China’s leading banks worth billions of dollars and analysts say they could be tempted to sell down stakes to raise capital when their three-year lock-in periods start to expire from next month.

“Bank of America cancelling those trades has made the other foreigners realise they don’t exit at their discretion; they exit at the discretion of the Chinese government,” said one Asian dealmaker who asked not to be identified.

Very chilling, indeed.  Problem is, the FT’s reporting is crap.

See more…

Lawyers, war criminals and the Federalist Society

From the declassified summary of the Senate Armed Services Committee’s “Inquiry Into the Treatment of Detainees in U.S. Custody” —

The abuse of detainees in U.S. custody cannot simply be attributed to the actions of “a few bad apples” acting on their own. The fact is that senior officials in the United States government solicited information on how to use aggressive techniques, redefined the law to create the appearance of their legality, and authorized their use against detainees.  Those efforts damaged our ability to collect accurate intelligence that could save lives, strengthened the hand of our enemies, and compromised our moral authority.

Someone remind me again why war crimes trials are a non-starter.  And if so, why the Bush-Cheney gang can’t just be prosecuted for fraud, or for treason.  Can’t we just sue John Yoo and Jay Bybee for malpractice and have them disbarred?  Is that too much to ask?