This must be a consequence of spending too much time talking to managing partners, but I can’t help feeling sorry for Freshfields Bruckhaus Deringer’s chief executive, Ted Burke. There you are, presiding over one of the UK’s most globally successful businesses, and you produce a fantastic set of results against a challenging market backdrop. ‘Fantastic’ in this case means a near-40% hike in average partner profits to Sullivan & Cromwell-esque levels, achieving a long-term strategic aim of upgrading your ‘share price’ to compete at a global level. What’s more, this has been achieved to a considerable extent thanks to a high-risk restructuring of the business that attracted painful criticism and sniping from rivals.
But such is the current environment that the firm feels the need to wheel out Ted in sackcloth and ashes to deliver an almost penitential message regarding its success and promise that things will get worse — lest the firm be criticised for unacceptable success.
But unacceptable compared to whom? Certainly, you can make a compelling argument that corporate lawyers are paid too much these days but the legal profession is an odd whipping-boy for the sins of income inequality given the excesses of global finance. The profession also pays a good deal of tax relative to other industries.
And Freshfields’ numbers need to be put in context. Freshfields sought to do two things: focus itself further upmarket and ensure that the slimmed-down business fired on all cylinders. The firm took substantial flak but — guess what? — it delivered, not only in financial terms but in practice quality. Likewise, its current success is in no small part thanks to the astute view that it took with its 2006 restructuring in the middle of a bull market. That kind of long-term strategic thinking is something we don’t see often enough from UK business, and we certainly didn’t from the banking community. It also partly explains the slingshot effect of Freshfields’ results as the firm elected to take an eight-figure hit in restructuring costs in 2006-07, creating a late surge effect this year.
Similar forces are in evidence at Clifford Chance, which managed a creditable 11% turnover rise despite its exposure to the US economy and the badly-dented structured finance market. There is, of course, the lag factor in law that means boom results tend to be out of sync with banking/industry; though I suspect this lag will be shorter than usual this time around. The bottom line is that law firms shouldn’t be apologising for their hard-earned successes — they should be presenting their case. No-one else will do it for them.
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