Three takeaway lessons from the implosion of the law firm Dewey and LeBoeuf:
There's no no-risk route. People who chose to go to law school, then chose to go work at a law firm founded more than 100 years ago, whose offices featured marble spiral staircases and, from the 43rd floor, views of Central Park, whose partners had included a former governor of New York (Thomas Dewey) and the son of the secretary of state (Elihu Root Jr.), and whose clients were Fortune 500 companies, might have thought they were playing it safe. But even low-risk routes have risk, and often when you think you are taking a low-risk route, that's when you have to be most careful, because you could just be underestimating the risk.
Individuals are increasingly more important than institutions. Dewey and LeBeoeuf's problems seem to have resulted in part from hiring a bunch of "superstar" lawyers with high guaranteed compensation packages. The superstars are just fine – they have now left for other firms. The firm, though, is in trouble. The value was in the individuals, not in the firm.
Regulations have costs. As Clifford Winston, Robert Crandall, and Vikram Maheshri write in First Thing We Do, Let's Deregulate All The Lawyers, state legislatures and the American Bar Association have worked together to "prevent even licensed lawyers who work for firms that are not owned and managed by lawyers from providing legal services." That means that Dewey and LeBoeuf, a global business that at one point had about $1 billion in annual revenue, couldn't have a non-lawyer chief executive or sell stock to the public. Now, having a professional manager or MBA as chief executive or being a publicly traded company is no guarantee against failure, as the shareholders of Enron or Lehman Brothers can attest. But a publicly traded share price would better transmit information about the health of the firm to those concerned with it. And removing the lawyer-executives-only restriction would broaden the universe of potential managers to include some that may have had skills that Dewey and LeBoef's leaders lacked.