The Swiss verein’s ability to function as distinct businesses while reaping the benefits of a single global firm is running into major problems.
Ah, it must have seemed so simple. How to square the – frankly, godawful – circle on partner reward in a global organisation where different bits of the firm charge radically different sums of money for doing, essentially, the same thing on the other side of an often non-physical border, arbitrarily decided in the mists of time by big hairy men with halberds.
“I know,” said some genius somewhere at some point, “let’s use a structure the Swiss invented for the regulation of inter-cantonal table tennis tournaments.”
“Hurrah, treble Toblerones all round!” (Other pentahedral chocolate bars may be available, depending on intellectual property law in your jurisdiction).
And so it came to pass that the large accountancy firms took this on board and duly created leviathans which might have had the same name on the brass plate on the door in different countries, but which operated separate profit pools, and where the actions of one office created no liability on the part of another in the network.
And all seemed well with the world, or nobody really noticed. Until, that is, law firms started trying it.
Verein never felt quite right to me, not least that ‘verein’ is an anagram of ‘I, never’, which may not have occurred to the Swiss, what with English not being one of their official languages. But I digress. It never felt right because I was labouring under the apprehension that part of the point of going through the door of a large law firm and paying eye-watering sums of money for advice is that you expect some kind of liability to be created, wherever your matters might travel in the firm.
The fact that, with a verein, liability – legal, moral, ethical – doesn’t seem to travel internationally never seemed to occur to anyone as, well, let’s call it a potential ‘sales deficit’.
Most of the time – who knows, 98 per cent? – this probably doesn’t matter a jot. Either the work isn’t cross-border, or the other offices are doing their job properly, or whatever. But I don’t buy insurance for the 365 days of the year when my house doesn’t catch fire. I buy it for the one day it might. When the chips are down (or the pan catches fire), that’s when structure begins to matter.
Or so I, and, it seems, an increasing number of genuine experts in the field seem to think. A few of the vereins have already run into issues arising out of what is starting to look at best like cognitive dissonance, at worst, an inherent bipolarity.
A Los Angeles County judge blocked Squire Patton Boggs from acting in a dispute between two sugar manufacturers in February this year; Norton Rose Fulbright found itself arguing that its US and Canadian operations were ‘distinct legal entities’ in a case in 2014 (which never came to trial); and most recently Dentons found itself presenting a similar argument to the International Trade Commission, which ITC administrative judge Charles Bullock threw out on the grounds that Dentons ‘holds itself out to the public as a single firm’.
As my friends and colleagues know only too well, one of the things I most admire about lawyers is the sheer scope of their intellectual horizon, encompassing the notion that black can be black one day and white the next. This is a necessary component of being a lawyer, not just that one can act for two clients in the same sector with diametrically-opposed business models, but that one can anticipate what the opposition is going to be arguing too.
But when you’re selling a product or service to a client, and when they’re paying such a titanic amount of money for it, you can’t hold yourself out as a single firm and then deny you are. You can’t have it both ways. Just can’t. Period.
A wiser man than me puts it this way: verein may seem like a neat way to square the differential profit circle, but is, simply, kicking the can down the road. It enables a facsimile of being one firm, but without the messy and hard work of becoming one firm.
Verein can end up masking the real problem – lack of a shared firm culture. The verein’s key strength is therefore its key weakness: it allows firms to bond without genuinely bonding; to preserve their own cultures while allowing for separate discussions around partner reward. And it is partner reward where the real culture wars are fought.
The big accountants, by the way, worked this one out a little while back and are looking for ways to create international profit pools, because there can be no other way to achieve the beneficial consistency of a one firm culture.
Those law firm vereins with some sense or foresight are following suit.
But the ones which aren’t, or which continue to operate a model of rapid growth based on the increasingly fragile, greasy skeins of the verein structure, will inevitably feel the pain of trying to argue that black can be both black and white simultaneously.