Slate Sneers at Simpson (and gets everything wrong)

Daniel Gross at Slate is one of my favorite writers about money and business. But in his latest column, he takes a huge swing at Simpson Thacher’s “Chow for Charity” program and misses worse than a 0L trying to answer a question in crim pro.

To recap, Simpson’s “Chow for Charity” allows summers to take a lunch for less than $15 and have the firm donate the difference between that price and the $60 per-person allowance to charity. Sounds a little odd, yeah. Sounds a little elitist, yeah. But it’s real money going to real people -- and in an attempt to paint it otherwise, Gross trips all over himself. Let’s go to the tape:

How does this small piece neatly encapsulate several important trends?

A Touch of Conscience. These days, any company that markets to or needs to hire well-educated proto-yuppies must take bold action on topics of concern ranging from global warming to poverty. Or, if it doesn't actually want to take the action, it must at least appear to be concerned. Doing good isn't a serious commitment or an end in itself. Rather, it's an ornament, like a wall sconce, that makes consumers or employees feel good about themselves and the company. The Times paraphrases a recruiter who notes that such efforts "are part of an emerging trend to add a touch of social conscience to lavish recruiting practices for top students in a competitive market." The greatest desideratum of firms is to undertake publicity-generating good works that don't require them to spend extra money or change the way they do business. Buy some renewable energy, by all means, but continue to maintain that fleet of corporate jets. Chow for Charity is a perfect case, since it doesn't cost the firm a dime.

Uh, small point Bob, but that last sentence is sort of completely wrong. The mistake is concluding that, without this program, the firm is otherwise spending $60 per associate per lunch per day. Maybe the swag skills of New York summers are without parallel, but at my firm, we rarely hit the budget. Sometimes lunch is $10/person, sometimes $25, rarely $40 or more. I’d bet it’s the same at Simpson. So, if 4 Simpson associates we’re going to spend $120 on the tab, but opt for $50 total instead, that’s a $190 check to legal aid—and twice as much total cash out of the firm’s pocket as it would have spent if the associates had stuck to the $120 lunch. It’s a small point, but when you sneer that “Chow for Charity is a perfect case, since it doesn’t cost the firm a dime,” you should probably have a factual basis for your statement.

The New Gilded Age. This is a golden age for corporations, and for the professional firms that service them, such as Simpson Thacher. According to the American Lawyer, Simpson racked up profits of $2.5 million per partner in 2006. (Given that, loudly trumpeting a program that generates about $50,000 in charitable donations seems a little gauche.) But this style of philanthropy neatly encapsulates the frequent obliviousness of the very rich, and of the publications that cater to them, to the nation's glaring income inequality. (Last week, the New York Times ran largely unironic articles about $60,000 beds and $225,000 parking spots.) Only in this new gilded age could a $15 lunch for a 23-year-old student be seen as a self-abnegating act. I can assure you that it is quite easy to gorge yourself on excellent food in New York for $15—a fine all-you-can-eat Indian buffet, a sublime pastrami sandwich from Katz's Deli, four street-side schawarmas. And plenty of New Yorkers would be thrilled to have $15 a day to spend on food. In the recent congressional food stamp challenge, several solons tried, without much success, to live for a week on the average food stamp budget: $3 a day.

Hey, no argument here about the new Gilded Age. I say tax-and-spend, tax-and-spend! (I’ll be looking to count on Gross’s vote for Obama come 2008, as he is clearly concerned with this issue.) But did Simpson really hold this out as a “self-abnegating” act? Yeah, $60 for lunch is absurd. But the truth is, if the company spends any less on lunch for any reason, it’ll be subject to a recruiting massacre on ATL and other blogs for “skimping” and “cheating its summers” and not “keeping up with the other firms.” So Simpson has found a clever way to ratchet down the pressure for high-flying lunches, all the while giving more money to charity than would otherwise go to Masa on a typical day. And this somehow makes it “gauche”? Which leads to the grand-daddy point of all...

Defining Public Service Down. For more and more of us, public service is something that other people do—other people with lower incomes, smaller apartments, and less nice stuff. (For the Iraq war version of this trend, see National Review columnist Jonah Goldberg.) The Times article quotes a recruiter who says law firms do this sort of charity because their recruits are really interested in community work. Now, law school is very expensive, and students take on large sums of debt to pay for it. So it may well be that many of Simpson Thacher's summer associates are just working there for the summer so they can go toil as community organizers upon graduation without excessive debt loads. But most are there because law firms such as Simpson pay massive salaries ($160,000 to start) and provide entree to even more-lucrative gigs at consulting firms, private-equity firms, and investment banks. Today, thanks to the benevolence of Simpson Thacher, you can pursue community work by taking your lunch at Pret a Manger instead of Le Bernardin.

You know how else summers, associates, and partner “pursue community work?” By working for free for poor people and non-profits. It’s simply amazing that someone could write an article about law firms and charitable giving and fail to mention the words “pro bono.” Does Gross not have any lawyer friends? As we all know, pro bono is the major “community work” law firms do and, last year, according to their website, Simpson attorneys did over 50,000 hours of it. That’s not “something other people do,” that’s not “an ornament” or emblematic of the firm’s “frequent obliviousness.” That’s about 70 hours of billable per attorney (730 of them), or roughly 3% of their work (updated--thanks Tom). Put another way, if we assume an average Simpson billable of $400 for all attorneys (which has got to be low), that’s $20 million in donated value for the year. That’s not too shabby.

But wait, there’s more! Let’s contrast that with Wal-Mart, which is one of the leading corporate contributors in the country. Last year, Wal-Mart gave away $270 million in cash. Which is pretty good – but this is for a company with revenues of $340 billion.

Also consider that when Simpson does pro bono work, that comes directly out of the partners’ pockets (and eventually the associates’ too). An hour spent doing pro bono is an hour spent not billing. But it’s laughable to think that Wal-Mart’s management spends 5% of their time helping small businesses, or Chevron’s board spends 5% of their time building houses. And Wal-Mart’s charitable giving doesn’t come out of their executives’ salaries. Instead, it’s spread over all the shareholders. Put another way, with 4.2 billion outstanding shares, Wal-Mart’s charitable giving of $270 million adds up to 6 cents a share. Think of that as money that the company could otherwise add to its 88 cent dividend.

Now, last year, the #4 exec at Wal-Mart got 80,000 shares, meaning the 6 cents a share “lost” to charity cost him...$4,500. Talk about self-abnegating! Meanwhile, a Simpson partner who spent 5% of his time on pro bono cost himself about 10 times that. But mentioning pro bono would ruin the entire premise of Gross’s article, which is how “fake” and “out of touch” law firms are in pretending to do community work.

Summer associates are already a great deal for law firms—their hours are billed out to clients at hourly rates of between $200 and $300, but the firms don't have to pay any benefits.

What is he talking about? The firms don’t bill out our time – they write 85% of it off. And summer associates cost them money until they’re 1^st or 2^nd years. If Gross wants to uncover nefarious financial conspiracies, he should spend more time reporting on the Bush administration.

Translation: It's a double-winner when kids pick the cheap meals over leisurely lunches...Senior lawyers don't have to spend as much time feigning interest in the ambitions of 23-year-olds...

Finally, FINALLY Gross gets something right. No argument here.