This is an update to my post on law firms as Ponzi/MLM schemes.
In the wake of the turmoil in the financial world, there have been a variety of articles discussing whether different governance structures (entirely different, not just better corporate governance) would have perhaps made a difference. Of course, it all comes back to incentives. In this Dealbook Deal Professor installment, Stephen Davidoff explores the tensions between private and public firms and sets out the issues. He references Prof. Ribstein’s timely response/reply (it seems almost like more of a conversation), which points the reader to Ribstein’s uncorporation concept.
Davidoff notes that the incentives for employees to stay with the large firms was dramatically decreased after they went public, which parallels my MLM analogy for law firms. Once you’re in, the only way to make money appears to be staying on the inside. Leaving doesn’t really get you anywhere.