Thursday, June 18, 2009

lawyerschile: Special Newsletter Article: How Global Are We?

Special Newsletter Article:  How Global Are We?


 With all the talk of globalization and internationalisation, I decided to take a look at just how global our industry is.  Data, in other words, not anecdote.

To do so, I started with The Lawyer's 2008 "Global 100," its report on the 100 largest global firms.  Interestingly enough, all but two are based in the US or the UK, but that's a topic for another day.

Conveniently, they provide the percentage of lawyers who are outside the home country, which is what I was looking for.  What, after all, could be a better proxy for how "international" a firm is than the percentage of its lawyers who are not in the original home nation?

I decided to break down the firms as follows:

  • More than 50% of lawyers outside the home country
  • From 25% to 50%
  • From 15% to 25%
  • And, as a special bonus item, to look at New York-based firms separately.

First, to the results, then, to the discussion.









    Quote of the month


    Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits — of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. Enterprise only pretends to itself to be mainly actuated by the statements in its own prospectus, however candid and sincere. Only a little more than an expedition to the South Pole, is it based on an exact calculation of benefits to come. Thus if the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die; — though fears of loss may have a basis no more reasonable than hopes of profit had before.

    --The State of Long-Term Expectation, John Maynard Keynes,  
    "The General Theory of Employment, Interest and Money (1936) 

    So What Does This Mean?


    Simply put, that we're a lot less international than we think we are.


    But a note on methodology:  The red bars are UK-based firms and the blue bars are US-based firms (The Lawyer defined DLA as US-based, so I simply followed suit.)


    Firms with more than half their lawyers overseas are international by any measure.  Interesting is that 7 of the 10 firms filling this category are UK-based, including all of the Magic Circle.  Indeed, if your coin-flip on DLA came up the other way--and if Baker & McKenzie is tagged as a sort of one-off representative of very little--then you could argue that 8 of 9 are UK-based, with White & Case the only clearly US-origin, powerfully international firm.


     Turning to the 25%--50% cohort, 5 of the 13 are still UK-based; but this is the last we'll see of UK firms.  In other words, all UK firms in the Global 100 have at least 25% (it's actually more than 33%) of their lawyers outside the UK. 


    In the 15%--25% tier, all 14 of the firms are now US-based.


    You will note that on that chart I also drew a red line across at the 20% level.  Why?  


    My seat of the pants instinct is that firms with fewer than 1 in 5 of their lawyers abroad cannot lay serious claim to being "international."  Yes, we could certainly debate whether the line should be drawn at 10%, 20%, or 25%, but I think we can all agree that line belongs on the chart somewhere. 


    And, if you agree with me that 20% is a sound cutoff, then only five of the 14 firms shown there remain "international"--the rest are below the 20% mark.


    Finally, I couldn't resist taking a look at New York-based firms.


    Only five of the 13 New York-based firms lie above the 20% cutoff, and two of them don't even clear 5% (Paul Weiss and Proskauer).


    I stand second to none in my loyalty to New York, but this compels a troubling question:   If the world is going more global (it is), then what plans do these firms have to adapt to that reality?


    To be sure, heretofore (at least until, say, the enactment of Sarbanes-Oxley), being focused on New York provided a powerful strategic base.  In a way, what these firms have done is entirely understandable, if it might strike those with a more international orientation as suboptimal. 


    But, as they say, that was then and this is now.


    Just this week, I was discussing what the contours of the post-Great Reset financial world order might look like with a UK-trained lawyer (Cambridge) who has spent a fair amount of his career in New York, and I found that I could not take issue with his belief that "on the other side" of this financial crisis the City of London would emerge stronger than ever.  Consider:

    • Not only could the Legal Services Act permit and compel all sorts of fascinating innovation, but the Financial Services Act is a more consistent, comprehensive, and simply "lighter" regulatory framework than the US's current alphabet soup of turf-war battling state and federal regulators.  (Sadly, so it appears as of just this morning's headlines, the Obama Administration has run up the white flag in the fight to change that before battle was even joined.)
    • If you want to do business in the span of one day with North America, Europe, and Asia, London occupies just about the perfect time-zone.
    • The infrastructure is already there.  Do not underestimate this.  Remember when Frankfurt was destined to be the next London, or at least the London of the EU?  I believe one substantial reason that never happened is Frankfurt's relative lack of financial, legal, and "support" infrastructure--"support" including everything from black cars to IT specialists, caterers, and graphic designers.

    Oh, and another thing about New York firms' relative lack of overseas presence:  What might that do to their law student recruiting efforts in the long run?  Not just foreign-born, but US-native law students are increasingly interested in a stint abroad.  Judging by the chart above, that could be a challenge for some of these firms.


    But one can always hope.  Hope that Sarbanes-Oxley will be repealed, hope that the Members of Parliament will find a way to screw things up, hope that US financial market regulation might finally be rationalized and not just BandAid'ed over.


    Or one could start laying plans to move to London.


    Comments or thoughts on this article?

    The editor is always in.

    Adam Smith, Esq.

    Difundan libremente  este artículo
    Rodrigo González Fernández
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