Limited liability to be blamed for Howrey failure?
Most commentators say that Howrey failed as a result of a quick expansion and partner dissatisfaction arising from a combination of fluctuating profits and a lack of transparency.
Washington Post columnist Steven Pearlstein has suggested an additional reason for the demise of Howrey: the fact that the firm adopted a limited liability structure.
When firms go down this route, according to Pearlstein, partners are shielded from liability and this can have an adverse effect on decision-making. "That means that they are apt to be less careful in making decisions about what risks and expenses to take on, knowing they do not face the prospect of losing all of their net worth" he says. "They also have less incentive to commit themselves to a long and difficult turnaround when the firm gets into trouble."
Pearlstein suggests that lawyers need to turn their firms "back into genuine partnerships and their business back into a profession."
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