Biglaw, Lateral Moves, Money, Partner Issues, Partner Profits

Partner Profit Reports: K&L Gates Swing Wide Open

K&L Gates offers very detailed financial disclosures. What is motivating their opening of the kimono?

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K&L GATES — EMAIL FROM PETER KALIS — 2012 FINANCIAL RESULTS

From: Kalis, Peter
Sent: Thursday, February 21, 2013 6:43 AM
To: ALLLAW
Subject: K&L Gates 2012 Financial Results
Importance: High
To: All Lawyers

Colleagues,

Although our firm’s financial performance is fully transparent to our partners, we wish to extend that transparency to all of our lawyers, including associates, and to include categories of information that industry publications have ignored. We also appreciate that such transparency afforded to over 2,000 people around the world will likely not stay within our firm family. Accordingly, the News Advisory found at the link below will also be distributed to industry and other media outlets and posted on our web site.

In the News Advisory, we not only have enlarged the scope of financial information beyond what other law firms and industry publications provide but also have substantially altered the presentation of our financial results to bring it more in line with the standards and format used in other industries. We have taken these steps because, with greatest respect to the hard-working reporters and editors who each year compile and present financial data on major U.S. law firms, it’s unfortunately the case that law firm financial reporting has become clouded with confusing, irrelevant and at times false information. Consider the following:

The massive overstatement of revenues and other metrics by Dewey & LeBoeuf remained undetected and unchecked over multiple years by publications in the U.S. and the U.K. In a world capable of producing Bernie Madoff, this may seem insignificant. But there has been no indication that major publications are taking steps to detect any other misstatements or to prevent future distortions of their rankings.

Published finances of U.S. law firms are based on data secretly supplied by law firms or other sources with little or no public accountability. We don’t know which law firms cooperated by dutifully filling out surveys, which ones did not cooperate but whose results are nonetheless presented as equally authoritative, or what the methods and sources are for determining financial results when firms do not cooperate.

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The various rankings of law firms based on gross revenues might now be referred to as the “Faux Firm 100” because of the inclusion of mere referral societies in which separate law firms share common brands. As recently as two weeks ago, the Chairman of one such agglomeration described his group as composed of “member firms”. Precisely. Yet, while those referral societies don’t regard themselves as one firm, industry publications do. Just because it’s easy doesn’t make it right.

Publications make no effort to adjust metrics to account for different business models of different law firms and seek instead to exploit these apples-to-oranges comparisons in order to create story lines for their magazines. Metrics expressed as averages, for example, have been rendered increasingly irrelevant in an era of radically different law firm business models and geographic footprints as well as equally divergent approaches to sharing equity ownership. Yet such problematic metrics remain central to the magazines’ approach to financial coverage of the legal industry and thus drive unfortunate and destructive behaviors within law firms.

In their surveys, publications consistently ignore financial aspects of law firms that could have predicted law firm failures — debt loads, unfunded retirement obligations, undercapitalization, illiquidity and the like. These indicia go right to the heart of institutional stability.

These and other shortcomings in the present system reflect faulty design, not lack of effort or professionalism of those who execute their reportorial and editorial missions each year. Nevertheless, until the design is improved, we believe that neither the industry nor this firm is served by contributing to the incomplete and misleading presentations of financial data relating to major law firms.

Please find our 2012 Financial Results at the this link: http://www.klgates.com/files/Upload/2012_Firm_Financials.htm.

Sponsored

Thank you.

Peter J. Kalis
Chairman and Global Managing Partner
K&L Gates LLP

K&L Gates Announces 2012 Financial Results [K&L Gates (press release)]
We Can Do Better [Adam Smith Esq.]
The Am Law 100, the Early Numbers: K&L Gates Sees Revenue Hold Steady, Profits Inch Up [Am Law Daily]
In Push for Transparency, Law Firm Releases Financial Results [DealBook / New York Times]
Big Law Firm K&L Gates Lifts Veil on Financial Performance [Wall Street Journal (sub. req.)]
Top U.S. law firms report higher growth rates in 2012 [Thomson Reuters News & Insight]

Earlier: Partner Profit Reports: Quinn Emanuel, Bingham, Perkins Coie
Everything Is Great, K&L States: Peter Kalis Comes Out Swinging

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