My work as an expert witness (mostly in software patent cases) occasionally takes me to absurdly lavish offices of the world’s largest law firms. Perhaps partly due to the rent that they pay, the fees are breathtaking even when the stakes are pretty small, e.g., because the accused product does not generate much revenue. A partner at a small firm, which, at least in his opinion, can do work of comparable quality, explained that companies, especially public ones, aren’t very price-sensitive because the decision regarding which law firm to hire is made by Board members rather than the shareholder-owners who will have to pay said breathtaking fees. “If the firm loses the case the Board members are completely protected if they can say that they hired the biggest and best firm. There is no potential for liability if they spend 2-4X more than they needed to. But they can be sued and/or suffer a loss of personal reputation if it becomes known that they approved the hiring of a no-name firm.”
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How true. A variation of the old “nobody ever got fired for buying IBM”. Maybe that’s the same logic over-priced CEOs are hired by corporate boards: “Don’t blame us. We got the best person we could; let the shareholders take the loss if they don’t work out.”
Sorry, off topic, but related to your previous hipster chocolate posts.
Extremely expensive hipster crap:
https://www.buzzfeed.com/peggy/can-you-guess-how-much-these-hipster-versions-of-f?utm_term=.ayO0JJ5zG#.hyLJbbL3o
Best one is the salt… ~100g of salt for 14 bucks!! Perhaps what is really being sold is the retro graphic design a la “Wendy’s vintage table tops” or “Beagle Bros Software.”
Authentic Pata negra ham from Spain costs the same (~150 dollars/kg)… albeit it comes with meat and not just salt. Not to mention meat from acorn fed pigs.
Wow, a 1/4 lb. of salt for $14.25 – $57/ lb. I just bought a box of 4 lbs. of Diamond Crystal sea salt for 99 cents at a closeout store – $0.25/lb. , so the fancy NaCl costs 228x as much as my humble NaCl (never mind that all salt is sea salt, the one that I bought is actual evaporation salt from the salt ponds of San Francisco Bay opposite Palo Alto – Cargill has a huge operation that has been there for 150 years). Now mine has the texture of regular table salt and not those nice flakes but salt is highly water soluble so unless you sprinkle the flakes on at the last moment they will dissolve anyway. Also my NaCl came in a humble cardboard box labeled for food service use, not a zip lock pouch – that pouch alone must cost 25 cents, leaving only $13.94 unaccounted for (6 cents for the 4 oz. of salt).
One benefit of $1000/hr law firms. No plantiff can pull the, “…Are you a graduate of Harvard Law school? […]Because you don’t sound that intelligent, and if you’re not a graduate of Harvard Law School, I don’t see why I should cave in,” shtick. link
It is not exactly a revelation that people who spend other people’s money on themselves do so with less care than people who spend their own money on themselves — there is a great Milton Freedman video on this subject. For example the writer when he travels to these expert witness sessions probably uses a higher class of air service, stays in more expensive hotels, and eats more expensive meals than he would if he were paying himself — assuming that he is good enough or perceived to be good enough that whomever is retaining him will permit it. The point of the partner at the smaller firm, that we are just as good as they, but a charge a lot less, could be true but most likely is not.
Ask them next time for a fee that includes travel and lodging, e.g. you’ll pick it up and then fly coach and stay at motel 6 and keep the savings.
“the decision regarding which law firm to hire is made by Board members rather than the shareholder-owners”
All decisions for a public company are made by someone other than the shareholders-owners, that’s he point of a corporation – the shareholders do not have personal liability and they give up management. On the other hand the shareholders have recourse, since they elect the board who hire managers, etc… You would be right to say that governance is lacking in helping shareholders hold management/board accountable, but it does happen, eg: a bank has been possibly wasting money on legal expenses and some shareholders, managers and other board members noticed:
http://www.wsj.com/articles/deutsche-bank-aims-to-stanch-legal-costs-this-year-1463649944
I happened to overhear a lawyer and some administrators talking once in a cafe. This was small town, so not the same, still relevant. The upshot of the conversation was one lawyer explaining to the administrators how the pissy looking office of one firm in town had ten times the business of the firm with the posh office.
Things are not always what they appear to be.
Regarding big law firms, have you noticed the bathrooms? I’ve visited many the extravagant offices of enterprises in oil, engineering, tech, government, … and I’m always shocked by how trashed the bathrooms are at law firms: unflushed toilets, piss all over the urinals, paper towels thrown on the floor.
John – did you try the ladies’ room?
Surely the board of directors is compensated with stock, just like all the other shareholder losers. Of course, lawyers created the board of directors just like they created the rules of modern dating, so they would want to get the maximum payback from their creations.
John,
at least at law firms the partners try to hit the bowl. No such luck in semiconductors, although we’re not paid $1k/hr, either.
@Sam
Generally speaking, the ladies rooms are much worse than the mens rooms.