Firm Leadership

Rants, Raves, Rebuttals, Reflections, Revelations & Ruminations

Following on my last rant, Matthew S. Toll a third-year law student at New Orleans' Tulane University Law School is either a creative go-getter or an example of what's wrong with the profession.

Toll, 25, drafted his pitch to look like a five-page pleading. It says he doesn't "need to see the light of day for the next 30 years" and swears, "I am utterly unconcerned with having any sort of personal life outside the firm." If his mother's funeral was on the day of an important deposition, "I would do the eulogy via teleconference."

"I don't regret sending it out," Toll claimed. But he said that he only meant to test out its impact, never intending it to get widespread attention. Hundreds of e-mail messages about it, he said, include many purporting to be from people at law firms who know nothing about it when called. He said he's gotten eight genuine interviews, six with firms, one with a judge and one with a prosecutor.

Despite the success, he's plenty miffed at Wolff & Sampson, the West Orange, N.J., firm that leaked his application. Because of the publicity, "I can't even approach a whole range of firms," he said, muttering about an ethics complaint or a suit. The firm said only, "The recent release of the cover letter and resume of Mr. Toll was the unauthorized act of an associate who is no longer with the firm." Toll thinks his critics are losing sight of the fact that the letter was obvious hyperbole. "Of course I would go to my mother's funeral," he said. His mohter should be pleased!

Here's an excerpt from an e-mail that's been flying around Wall Street and dubbed the "Most disturbing resume cover letter ever:" It was written by a law-school student and entitled "Plaintiff's First Request For An Interview."

This candidate says, if hired, he would be the most unwavering of advocates. "I am unconcerned with whether your client is a murderer, rapist, corrupt business executive, credit card compa ny, insurance company, or an indigent migrant worker who was injured at the tail-end of a 16-hour shift by a teenage drunk driver. I am utterly unconcerned with having any sort of personal life outside the office. If my mother's funeral was the day of a key deposition, I would do the eulogy by teleconference after the deposition. If my wedding day was on the date of a key trial, the wedding would be postponed. I need an acceptable job offer * . . . as I was brought up in affluence and have a taste for the finer things in life."

Yes, there was a footnote: * An acceptable offer would be "at least $70,000 per year, with a sign-on or relocation bonus of at least $5000 and an end-of-year or Christmas bonus of at least $5000."

Other gems? "My academic performance is exceptional. Although my grades have only been slightly above average . . ." Yes, these sentences follow one another. And his 'exceptional performance' puts him in the top 49.3% of his law school class. And then, "My commitment to community service is exceptional. I spent the summer after my first year of law school volunteering [i.e. without pay] for an organization known as . . ."

I honestly couldn't make this up. I just want to see this and other brain-dead jackasses like him, lined up, shoulder to shoulder, so that Mister and Missus America can get a good, hard look at them; so that we can transfix them with our steely gaze and commit their faces and names to memory on the off-chance that one of them may just run for public office one day.

Since the passing of the Sarbanes-Oxley Act, American business has seen drastic changes. The intended consequence of the Act was to increase the reliability and accuracy of corporate reporting, accounting, and audit practices. Although its intentions were pure, this legislation has had unintended effects on day-to-day business practices.

Studies have shown that the Act is causing companies to spend, on average, $2.5 million per year to stay in compliance. The bulk of these increases are outside auditor fees that have gone up significantly. The remainder goes to law firms, consultants and other outside advisors. Additionally, the demand for qualified executives and independent directors has increased, while the "supply" of individuals willing to accept the risks and hold these positions has decreased.

Another unintended effect is due to the elimination of loans to executives, which, had become a mainstay in executive compensation. For many years, companies granted loans to executives for multiple reasons, including: sign-on bonuses, stock purchases, relocation, home purchases, etc. The loans with either discretionary and/or performance-driven forgiveness provisions took the place of some of the large cash awards (sign-on bonuses, etc.) that were prevalent in the marketplace. The key difference with the loan forgiveness programs was the powerful retention tool they would offer during the life of the loan as executives were "handcuffed" by the forgiveness provisions. Due to several cases of exorbitant loans and guaranteed forgiveness, Sarbanes-Oxley now prohibits these loans. It appears that the abuse caused the removal of what had been a useful compensation and retention tool.

Further, the uncertainty surrounding the legislation and its implications has caused a "freezing up" of operations in boardrooms across the U.S. The decision-makers at companies are, in many cases, now so intently focused on legislative issues they have been distracted from their business' primary operations. And it is not just the CEO and CFO being asked to certify results and taking the additional risks and responsibilities as part of their expected duties. Although not specifically required, many companies are requiring attestation and certifications of financial results by their division presidents, department heads, and the like in an effort to enhance governance and controls. I believe the highly technical term for this behavior is CYA!

"Few Chevrolet drivers would guess that the single biggest cost of making their car was medical care for retired workers," the Financial Times reports. "But General Motors... spends more on healthcare for pensioners than it does on steel. On each one of the 5.5m vehicles churned out by GM's North American factories, healthcare for pensioners cost more than $1,300, well above the steel cost."

As a result, General Motors, which is the world's largest buyer of steel, has become one of the world's biggest healthcare providers.

At the end of last year, GM's total post-retirement benefits liability - consisting almost exclusively of healthcare obligations - totaled a staggering $51 billion. Even worse, GM's already considerable liability will likely increase by an additional $4.5 billion this year. How much money is $4.5 billion? Almost double GM's anticipated profits this year.

Can someone tell me: Is this the way it is supposed to work? The sun rises in the East and sets in the West. Jelly sandwiches inevitably fall face down. And despite the troubles at GM and the looming difficulties in the U.S. financial sector, the virile stock market seems to rise every day . . . what gives?

A Charlotte, NC, lawyer purchased a box of very rare and expensive cigars, then insured them against fire among other things. Within a month having smoked his entire stockpile of these great cigars and without yet having made even his first premium payment on the policy, the lawyer filed claim against the insurance company. In his claim, the lawyer stated the cigars were lost "in a series of small fires." The insurance company refused to pay, citing the obvious reason: that the man had consumed the cigars in the normal fashion. The lawyer sued . . . and won!

In delivering the ruling the judge agreed with the insurance company that the claim was frivolous. The Judge stated nevertheless, that "the lawyer held a policy from the company in which it had warranted that the cigars were insurable and also guaranteed that it would insure them against fire, without defining what is considered to be unacceptable fire," and was obligated to pay the claim. Rather than endure a lengthy and costly appeal process, the insurance company accepted the ruling and paid $15,000 to the lawyer for his loss of the rare cigars lost in the "fires."

NOW FOR THE BEST PART . . . After the lawyer cashed the check, the insurance company had him arrested on 24 counts of ARSON!!!! With his own insurance claim and testimony from the previous case being used against him, the lawyer was convicted of intentionally burning his insured property and was sentenced to 24 months in jail and a $24,000 fine.

This is a true story and the 1st place winner in the recent Criminal Lawyers Award Contest (and here you gotta imagine that I am crossing my eyes and waving my index finger in little circles at my temple, to indicate what is referred to in polite company as "loony tunes").

Burson-Marstellar has done an extensive study of CEO salaries. Their conclusion: Average total compensation for a CEO is $16.5 million. Average worth of a CEO to the company is only $3 million.

Much of this compensation is hard to spot. You have to go to the proxy statements, which too few people do, to uncover CEO salaries, bonuses, and stock options and awards. Even then, other costs like contributions to their retirement, the retirement formula, perks and severance benefits may be missing.

Thanks to Jack Welch, former and famous head of GE, we have entered the age of shareholder value and CEO as superstar. Shareholder value, Jack's mantra, translates to 'make the stock price go up, n o matter how you do it.' And boy did Jack do that. Adjusted for splits, GE stock went from around $4 a share in 1980 to a high of $60 in 2000. But Jack's accomplishments are hollow at the core and that's the reason GE stock is down 50% today from its high.

But whether or not they manage to genuinely improve their companies, CEOs are paid like kings. The sneakiest deals don't show until the bill comes due. Delta gave its CEO, Leo Mullin, credit for 25 years of employment when calculating his retirement plan. He only worked there for three years.

All this is not to say that I'm against hefty salaries. Big pay for big performance is the American way. Bill Gates took the risk, put his future on the line and babied and bullied Microsoft to its market dominance. Anyone else who can take a company from startup to a world-class firm can name his price. The rest of you guys . . . $3 million a year if you're good. Six if you're really, really good.

Well it's has been f ar too long in coming, but it has finally happened. When a patient was left waiting more than three hours to see a doctor, he decided to teach the physician "a lesson." He successfully sued the doctor for the time he endured in his waiting room.

Mr. Belavilas decided to sue for $5,000 in small claims court because of the lengthy wait to see his Las Vegas based doctor for back pain treatment. He said his appointment was for 2:00 p.m., but the doctor didn't show up until 5:15 p.m. The doctor "didn't say he was sorry and that he was with another patient or that he had gotten a flat tire. Nothing," said Mr. Belavilas. "People are people and they have to be respected, he told CNN.

The official reaction from a representative of the Medical Society: He said he was not aware of anyone complaining about a lengthy wait to see a doctor. Duhhh!

And I always thought that was why they called it the "waiting" room and addressed you as the "patient."

Just when many might had suspected that the death of Andersens would also herald the demise of MDP's (multi-discipline professional firms), today's Financial Times, posits a rebirth. Apparently, the UK government has announced plans to deregulate the legal industry. And what precisely does that mean? Well, it means that we are about to see the allowing of mergers between accountants, investment banks, and lawyers in England and Wales.

David Clementi, former deputy governor of the Bank of England and chairman of Prudential, will head an independent review panel in charge of recommending legislation for a more open legal market, as well as a new agency to oversee the legal profession. The Law Society, which represents 90,000 solicitors, may lose its self-regulating powers.

What have we come to? I don't know for sure . . . but we'll find out together. For my part, I will scarf down an entire bag of Coffee and Cream Oreos, and then, as Rosanne Barr once said, "When you come down out of that sugar-coma, it will be a whole new week!"

More to follow.

As I read today's newspaper I notice that a study was made of how much the American federal government is likely to need to pay for all its promises, reduced by what it is likely to collect in taxes. The calculation must have sent sparks flying from the economists' computers. As it turns out, the shortfall comes to $44 trillion . . . or about half a million dollars per family.

That doesn't count the private debt in America - estimated to be another quarter of a million per family. There is also the trade deficit, which - at about $500 billion annually - deserves at least a dishonorable mention. It is another animal altogether, of course, but one which drinks from the same watering hole.

Now, imagine that you are the CFO of this enterprise, one that already has net debts and liabilities far beyond its ability to pay. Even if the entire world pitched in to help, debts of this magnitude could never be honestly settled. And yet, the enterprise is still living way above its means; every day, the federal government spends about $1.5 billion more than it takes in . . .

So I turn to the obituaries. Not finding my name, my spirits lift . . . and my thoughts move on. Today is a gift . . . that is why we call it the Present.