Law Firms Begin to Decrease Associate Salaries

Ashby Jones of the Wall Street Journal, in his Law Blog a few days ago, reported that, much to his surprise, a number of large law firms, including top 10 firms Greenberg Traurig and Baker & McKenzie, have reduced associate salaries for next year. He also noted that Nixon Peabody and Seyfarth Shaw have done the same. It seems most are cutting starting salaries from $160,000 to $145,000.

Law firm partners quoted realized the importance of balancing the economic reality with ensuring that they retain the top talent, but none seemed concerned that this would lead to associates’ rescinding acceptances. For many years most in the industry watched Cravath, Swaine & Moore set the pace each year on where associate salaries were going. The last big runup in salaries actually started with Silicon Valley firms. This decrease also does not seem to have emanated from CS&M. It is not yet clear whether others will follow.

I am thinking, at this level of compensation (this does not even take into account bonuses) it is better to employ more people at a 9% lower salary than have to cut 9% of the staff. Yes, I’m old enough to remember the exciting year 1986 when associate salaries “jumped” from $50,000 to $65,000 just as I was joining a big firm. The firm I joined paid slightly less than the biggest guys. Our joke was we made the going rate, which was defined as “just enough to keep you from going.” And hopefully, as things recover, so will the salaries. But with some big firms seeing double digit declines in their profits for the first time, well, ever, making some adjustments makes sense for all.

Madoff’s Secy Talks…a Little

Eleanor Squillari was Bernard Madoff’s personal assistant for 20 years. She has now decided to talk, and was pretty convincing on the Today show today making clear she had no clue what was going on, and only in the few weeks prior to his arrest did his behavior get somewhat erratic.

According to the AP, she believes he arranged the circumstances of his arrest and refusal to cooperate in an effort to protect others, but she did not say who the others were. Apparently she’s been working with the FBI for several months. On the day he was arrested, he spoke to her and wanted to know, in particular, whether the FBI had looked at his appointment book. Wondering what was in that thing.

She also made clear that Bernie’s wife Ruth was very sharp and took care of his personal finances. Eleanor had actually invested in Bernie’s fund but apparently took her money out back in the 1990s. Through his lawyer Ike Sorkin, Madoff did not comment on Eleanor’s statements.

Who would Bernie go to jail to protect? Presumably not his employees, so some surmise it’s family members. Only time will tell.

Why Can’t a Downturn Spell Success?

Many of today’s most recognizable products were introduced during the Great Depression — 3M’s Scotch tape, Revlon’s long-lasting nail polish, Campbell’s Chicken Noodle soup, and GE’s fluorescent light bulb. Some of America’s powerhouse companies – Motorola, Unisys, Converse, Hewlett-Packard, La-Z-Boy and even the Pittsburgh Steelers – were also founded during these tumultuous times, proving that good ideas and strong execution during an economic downturn is an opportunity to profit.

Bestselling author and business strategist Tony Jeary reveals what actions CEOs should take now to remain financially solvent and reap even greater rewards when the market returns. Author of the forthcoming book, Strategic Acceleration: Succeed At the Speed of Life.

10 essential steps CEOs must take NOW to get the upper hand:

• Recognize that “business as usual” is not an option and success is a moving target.
• Evaluate, test and revise strategies frequently to maintain a competitive position.
• Get out of your comfort zones or you’re dead. Challenge routines on a constant basis.
• Anticipate your competitors’ moves.
• Ensure your customers don’t forget about you and market aggressively.
• ‘Jump on it’ when everyone else runs for cover.
• Execute your most high-leverage activities. Strategies must be results-driven.
• If you don’t know how to implement a plan, drop it.
• Motivate employees about how they feel about their work not how much they earn.
• Exceed expectations – this separates winners from losers.

SEC Veteran Returns to Run All-Important Division of Corporation Finance

Reprinted from our sister blog, www.reversemergerblog.com.

Meredith Cross, an SEC staffer through the 1990s, has been selected by Chairman Mary Schapiro to return and run the all-important Division of Corporation Finance. “Corp Fin,” as it is known, oversees every public company’s disclosure.

It took a little longer than expected for this spot to be filled. Ms. Cross has a strong background, having been a lawyer in Corp Fin’s chief counsel’s office, and worked her way up to Chief Counsel. She also worked in the Office of Small Business, which bodes well for those of us focusing on that area. Sometimes we find that the backgrounds of Corp Fin directors did not provide them with sufficient ability to truly understand the unique needs of smaller public companies.

Now that this important role has been filled, we hope the Division can begin to turn its attention to matters that have been on the table for awhile, including our request for the SEC to consider reversing the ill-advised “evergreen” requirement limiting shareholders of former shell companies in their ability to sell shares without registration.

Best of luck Ms. Cross.

Are You “‘09 Well”?

I recently asked an investment banking client how he’s doing. He said, “I’m well thank you.” I said, “Well that’s better than most of us.” To which he said, “What I meant was I’m healthy.” To which I said, “So in other words you’re ‘09 well.” He laughed and said, “Exactly.”

I had one of those very minor moments yesterday where a medical test could have resulted in a problem. Luckily all is fine and nothing to worry about. As I drove to the city after the test, I laughed out loud in the car and decided I am ‘09 well. I also decided that, although we all say it, it’s really true that taking care of yourself and being healthy is pretty much the most important thing there is. So I’m determined to do even more to keep it that way in all that I do in life. My advice: you do it too.

Flush Times for Barter Spurring Industry Innovation

Since the onset of the economic downturn, the barter industry has bucked the downward market trend. Most barter exchange companies are currently growing by between 15 and 60 percent, and many are seeing an evolution in how their services are being used. Media-related services in particular are being purchased more frequently using barter.

BizXchange, a barter exchange that operates in the United States and internationally with offices in Seattle, San Francisco and Dubai, has observed that an increasing number of clients are using barter to design and purchase advertising in almost all mediums—including print, broadcast, online and outdoor.

“I think one of the reasons more and more companies are using barter to purchase advertising is because it usually requires an intensive cash outlay; using barter allows a business to preserve its cash resources,” said Bob Bagga, CEO of BizX. “It’s also one of the most efficient ways to use barter, because it leverages the trade investment to gain cash paying customers.”

During a recession, it is common for businesses to save cash by decreasing or eliminating marketing budgets. Having the ability to maintain or increase advertising purchases without affecting cash flow can strengthen a company’s market share.

Following are examples of BizXchange clients that have purchased advertising with barter.

King’s Mattress

King’s Mattress is a Puget Sound area mattress retailer with five locations providing top brand name mattresses and custom sizing. In the last six months, King’s Mattress has used BizX to design and place advertising in newspapers, magazines, on the radio, in direct mail and on bus boards. The company has also used BizX to design and produce in-store merchandising. The total cost of King’s Mattress media purchases with barter through BizXchange in the last six months has been over $89,000.

Stevenswood Spa and Resort

Located just two minutes south of Mendocino, CA, this AAA four-diamond spa resort is surrounded on three sides by the towering redwoods and golden meadows of the 2400-acre Van Damme State Park. In the last year, Stevenswood has purchased over $70,000 in print and online advertising through BizX—in glossy magazines, newspapers, trade publications and travel websites.

Arab Media Group

Arab Media Group (AMG) is one of the largest media conglomerates in the Middle East. Its businesses include top-rated radio stations (ARN), three newspapers (Awraq Publishing), and interests in online media, logistics and distribution, printing, events management and outdoor advertising. AMG is also home to the Arabian Television Network (ATN), the official Middle Eastern broadcaster for international channels such as MTV Arabia and Nickelodeon Arabia, as well as AMG’s most recent television venture, Noor Dubai. In the past six months, the group has promoted its new television programming by purchasing over $250,000 in outdoor advertising using BizX.

Stanford CIO Denies Charges

Stanford Financial Group’s former chief investment officer, no surprise, has denied charges that she participated in issuing fraudulent certificates of deposit along with her boss, R. Allen Stanford, who is also quite a bit in trouble (and has denied all charges) in an alleged $9 billion scheme.

Laura Pendergest-Holt, so far the only high profile female in the latest rash of alleged swindles (the New York Times politely declined to give her age as is their norm), is facing civil fraud and criminal charges (for obstruction related to an allegation she lied about her role in the mess). As we earlier reported, Stanford’s former CFO, James Davis, is cooperating with investigators.

The London Times online has reported that Pendergest-Holt gave employees and senior executives of Stanford carefully prepared scripts of what to say to the public, investors and regulators. There are reports that she is also cooperating, but that may have stopped when prosecutors started believing, apparently, that she was part of the scam.

Alleged Ponzi Schemer Arthur Nadel Pleads Not Guilty

Imprisoned alleged Sarasota, Florida Ponzi schemer Arthur Nadel, 76, pled not guilty to 15 criminal charges on Thursday. The indictment had been filed on Tuesday, according to Reuters. He is accused of bilking 350 clients of over $360 million. Small potatoes indeed compared to Bernie Madoff, but still very significant. The government has begun to work on grabbing his assets, including real estate in several states. Nadel has been trying to raise $5 million in bail money, but has not done so yet.

Apparently this guy went on the run for a few weeks before they ran him down, but the judge thinks $5 million will keep him around. His lawyers also say the senior citizen is not well and therefore not a flight risk. The allegations sound familiar – he created false account statements and never actually invested the money he received. One wonders if these schemes were really this ubiquitous for decades but managed to succeed as long as the market didn’t get too negative, but only when it went down over 40% in a short time did these things unravel. Hopefully not too many more of these!

Obama v. Hedge Funds on Chrysler

The President was dealt an embarrassment. He went on live prime time TV and told everyone he was more hopeful than ever that Chrysler will avoid bankruptcy and continue on. What he didn’t know was that a small group of the secured creditors (roughly 10%) was objecting to the proposed restructuring and ultimately derailed it, forcing the bankruptcy.

Many of the rest of the creditors felt the need to go along since most are either already owned by the Government or have big TARP money. But the hedge fund guys, including Oppenheimer Funds and others, said the deal was simply unfair, making them take huge haircuts while throwing lots of benefits to the auto workers, according to the New York Times.

Obama apparently went so far as to almost suggest the hedge funds were being unpatriotic. To which the funds respond, to help Chrysler get this great deal you are hurting the investors in our hedge fund, which include teacher’s pension funds and the like.

Experts predict the funds will probably do no better in the bankruptcy than in the proposed deal since the 90% that are not them will probably vote for a plan very similar and these guys won’t be able to stop it. I think.

Who’s right here? The only real way to know would be to understand the details of what was being proposed and whether indeed parties were being favored over the secured creditors of the company. The bigger issue is the extent to which the President has blamed Wall Street for so many of the country’s ills. I’m hopeful we can move past that soon.

Best Job After College in a Recession? Law School!

The ABA Journal reports that law school applications were up 3.8% over last year. A similar survey back in March showed only a 2% increase. In a survey 40% of college kids said they were applying in part to avoid having to look for work.

Yesterday I was with a family friend who just got laid off only a year or two out of college. He is thinking about graduate school as well but didn’t think he was interested in law. He has an undergraduate business degree. I explained my view that law school has uses way beyond a career as a lawyer. It can help anything you want to do in business. In business school we learn enough to kind of tell, for example, if our accountants are messing up. But not enough to tell if the lawyers are. Therefore, CEOs and others become unnecessarily dependent on their lawyers. My client CEOs who are lawyers have a much broader perspective on things. In business school they teach you how to reach for the sky. In law school you learn to manage risk. Both are good and both are important.  So a law degree can help just about anything you want to do in business.

Go law school!

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