Killed Chadbourne & Parke?
September 24, 2022
After over 150 years of practicing law, Chadbourne & Parke LLP announced that it would be shuttering its doors on January 1, 2016.
How could such an institution just vanish overnight? To figure out what killed Chadbourne & Parke,
You need to look at the culprits behind the firm’s downfall and then consider why the firm failed to make any progress in adapting to those factors over the last decade or so.
The investment banking business model
Too many regulations coupled with unstable demand for investment banking services caused the collapse of Chadbourne & Parke.
Investment banks make their money by executing deals and other client work, generating fees and commissions. In recent years, there has been far less demand for these services, so many bankers have had to find new careers.
To keep up with compliance standards set by the Sarbanes-Oxley Act of 2002, it cost too much to keep track of who was doing what in this environment – making things even more difficult for smaller companies.
Finally, Chadbourne & Parke’s ownership structure was unusual and unappealing – owning a stake in the company you are supposed to be valuing or providing financing for can cause some problems.
The law firm’s business model
It is a common misconception that the law firm’s business model is becoming outdated. The truth of the matter is that there are many advantages to practicing law at a large, specialized law firm like Chadbourne Parke.
One major advantage of working at such a place is not having to pay lawyers out of your pocket as they are employed by the firm and have already received their salary in advance, so you know upfront how much they will cost you and what costs can be avoided.
Also, the billing structure at these firms means that in addition to some fees for their services, clients may also receive fees from other cases on top of those for which their lawyer has been assigned.
Overlap between the two
Since the firm’s founding in 1889, Chadbourne has had a special place in the history of American law. It was founded at a time when the profession was not well respected and sought to change that perception by giving clients confidence that they were hiring top-notch lawyers and staff.
When it grew too large to manage under a single roof, the firm occupied virtually an entire city block in downtown Manhattan Parke, boasting more than 700 attorneys with expertise across virtually every industry.
…Chadbourne Parke also became known for cultivating partners who both excelled in their field of practice and could serve as mentors to their younger colleagues.
The idea was that even if these highly accomplished veterans might someday retire or die, they would leave behind a team of fellow partners capable of succeeding them.
Why firms could not compete on salary alone
Much of the work that big firms do requires specialized knowledge, so employers have to make a competitive offer to attract high-caliber candidates. However,
smaller firms like C&P couldn’t afford to offer sky-high salaries without also accepting sky-high risks. What they could offer their attorneys was room for advancement and variety, as well as autonomy. To keep top talent,
C&P gave those who were successful ample opportunity to pursue special projects in addition to whatever else they might be working on.
Even though C&P was a smaller firm, it wasn’t offering associates as much money. By spending less on salary, C&P had more to spend on high-quality support staff and technology. With that in mind, two of their senior lawyers were able to invest in a language translation tool for C&P’s internal use only.
That tool helped attorneys efficiently translate contracts into different languages, which made them more attractive to overseas clients.
Because many of these clients worked in emerging markets, they were often paying with unstable currencies or bartering goods in exchange for legal services. This cost C&P less than it would have if they hired foreign attorneys who charged higher rates than their American counterparts did.
A final word from a former CEO
This is what I know about business and Wall Street. Too many people believe that success on Wall Street and in business is a zero-sum game where one person’s victory necessarily means another person’s defeat.
This is true for many cases but not for all. When I was CEO Parke of C&P Parke, the lawyers at other firms did not see me as their adversary; they saw me as someone to be admired and emulated.
The biggest asset a CEO can have is to be loved by everyone on their team. In this sense, my tenure at C&P was probably my finest achievement because
I cared deeply about everyone who worked with me – clients, attorneys, staff, and shareholders alike – always believing that we were in it together.
Keep browsing Law Scribd for more updates.