Biglaw, General Counsel, In-House Counsel, Musical Chairs, Partner Issues

Reading The Tea Leaves When Heads Roll

In-house columnist Mark Herrmann asks: What can we deduce from an out-of-season executive departure?

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This is as close to titillating as I’ll ever get in one of these columns:  When a senior lawyer (or executive) leaves a company in December, what does that mean?

Basically, Ecclesiastes is all about changing jobs:  “To every thing there is a season.”

When a partner at a law firm moves laterally in January, that’s like leaves changing in autumn.  The partner waited to receive his (or her) year-end bonus from firm A and, having pocketed the bonus, then moved on to firm B.  That makes the lateral acquisition cheaper for the new firm.

The in-house world is a step slower:  When an in-house lawyer (or executive) moves to a new company in March or April, that’s like snow falling in winter.  The in-house person waited to receive his (or her) annual bonus in March (more or less) and, having pocketed the bonus, then moved on.  That reduces the hiring cost for the new company.

But when an in-house lawyer (or executive) leaves a company in December, that’s a blizzard in May!  The game is afoot!  (Blogging is so good for me.  I just learned that Shakespeare said that first, although I was thinking of Sherlock Holmes (who said it later) when I typed the phrase.)  Quickly, Mr. Watson!  What can we deduce from an out-of-season executive departure?

Often, a December departure was not on happy terms.

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Every rule has its exceptions, of course, and you can’t apply my general rule to any particular case.  But, if an in-house lawyer (or executive) leaves the company in December, the executive may not be delighted to be moving on.

Why, Mr. Watson? (I had in mind the second joke down when I created that link.)

First, companies may learn in December that they have a little extra money left in an annual budget.  Firing someone is likely to cost money — a severance package, accelerated benefits, whatever.  Thus, when a company learns that it has extra dough in the coffer, it may start thinking about accelerating employee departures. The company would rather take the charge associated with terminating someone in this flush year, rather than next year, when the cupboard may be bare.

Second, it’s great to fire people around Christmas time!  Ho, ho, ho!  The last two weeks of the year are quiet, and fewer people are monitoring corporate news.  If you ax someone in May, everyone will read about it.  If you ax someone in December, the news is more likely to escape notice.

Finally, senior corporate executives typically participate in assorted incentive compensation plans, and those plans often run on an annual basis.  If you fire someone in January 2014, there may be a spat about whether the employee is entitled to some (or all) of the incentive compensation attributable to 2014.  But if you terminate the person in December 2013, there’s less room to quibble: The employee participated in the 2013 plan for nearly a full year, and the employee did not participate at all in the 2014 plan.

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Does this means that everyone who changes corporate jobs in December was ignominiously fired? Of course not. Sometimes a corporation is desperate to bring a new employee on board immediately, and the corporation will pay a premium (including compensating for any lost bonuses) to speed the process.  Sometimes an employee is itching to leave a job and will accept a slight monetary loss for the benefit of escaping more quickly.  And, with a little thought, you could find dozens of other explanations, too.

Is it sacrilege to imply that Ecclesiastes is occasionally wrong?  Sometimes it does snow in May; everything doesn’t always occur in the proper season.

But, as a general rule, Christmas is a great time to fire people!

Happy holidays!

Mark Herrmann is the Chief Counsel – Litigation and Global Chief Compliance Officer at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

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