Editors' Blog

H1 mystery shows City transparency still work in progress

Posted 13/11/2008 by Alex Novarese

I’ve always found Slaughter and May’s obsessive secrecy around its financial results somewhat outdated and melodramatic. It seems at times as if they feel the need to maintain the mystique lest anyone realise that they are merely a very good law firm. But then I would say that as a journalist, I suppose, and at least no one can fault them for consistency in playing their profits close to the chest.

But there are some other City institutions where the commitment to openness appears to be having a minor wobble, at least with regard to first-half results. In particular, Freshfields, Clifford Chance (CC) and Herbert Smith have come over all coy despite in previous years usually giving revenue indications with a minimum of fuss.

In a gloomy market that usually means one of two things: it’s been a good performance, which can be embarrassing if clients are suffering, or it’s been a bad performance, which is just embarrassing, I guess, if you’re a competitively-minded law firm.

From what can be gleaned from partners and rivals, the performance at CC and Herbert Smith leans toward the latter camp, though the supposed roughly static revenue growth hardly looks disastrous in this market. I’m going to disgrace myself as a professional pundit by saying that I haven’t got much of a feel right now for Freshfields’ numbers, though they have taken to gnomically saying that “work-levels have been static” against H1 last year. Partners have also been clear that the market has cooled substantially for them without showing much sign of panic.

The firms for their part respond that there was never a formal policy of disclosing first-half results, which is true as far as it goes but hardly the full story. We also pressed the firms for their thinking in keeping quiet, given that they are LLPs and have disclosed financials for years. Safe to say the answers, the gist of which was half-hearted claims that H1 projections are not accurate, were not entirely convincing.

That is not to pretend that it is some outrage if City law firms don’t want to give guidance on their half-year results. But this shifting commitment to transparency does seem to go against the grain of a maturing industry taking its place in the modern business community. On a more practical level, you probably attract more attention by making a point of not disclosing than if you just got the numbers out there and moved on.

In many ways, of course, major City firms have become demonstrably more open in recent years; Freshfields rightly won plaudits for handling its partnership restructuring without going into bunker mode. Yet the fact remains that it is the largest City law firms that are still generally the group that are the most backward when it comes to being forward. Still, even Linklaters is set to formally confirm its first half numbers this year. When you’re being out-disclosed by Linklaters, you might want to rethink your policy.

See Top City trio keep quiet on first-half financials for more.