Most law firms that evolve from a solo or two-person practice follow a predictable path. The founding partners are the principal rainmakers and gradually add attorneys to support their increasing practices. At this stage of development, the founder(s) typically govern as benevolent dictators and their authority is not questioned. At some point in this evolution, other attorneys begin to develop independent practices/clients. These attorneys eventually initiate a more democratic management structure or leave with their "book." Frequently, resistance from the founding partners effectively limits the development of the firm past a relatively small size. In situations where the founding shareholders are willing to share power, the firm enters a democratic phase where each partner is given a say in management; however, ultimate power is often still concentrated with the rainmakers. As these firms continue to grow, the rainmakers increasingly control compensation decisions—the ultimate source of power at a law firm.
Unlike many law firms, all shareholders at Flaster/Greenberg have an equal number of shares in the firm. The day-to-day management of the firm is delegated to a Managing Shareholder and non-attorney administrative personnel led by an Executive Director. The shareholders meet as a group once a month to discuss strategic initiatives and major business decisions. The firm has an Executive Committee consisting of the Managing Shareholder and four shareholders elected to staggered terms. This Executive Committee makes recommendations to the shareholders on issues discussed at the monthly shareholder meetings. Finally, on an annual basis, the shareholders attend a retreat to formulate the business plan and discuss major policy initiatives.
Unlike most law firms, shareholder compensation is not determined by a subset of shareholders; but rather, by an objective formula equally applied to all shareholders. The mechanics of the formula are discussed below. The effect on the firm of having this form of compensation system is dramatic. The typical politics present at many firms is absent. New shareholders need not worry about alliances, voting blocks or existing loyalties among more senior attorneys. Management and the shareholders are not preoccupied with compensation issues and instead focus on strategic decisions. Shareholders are content because they feel like owners and are confident that every shareholder is treated equally.
Many sociologists will tell you that the most efficient form of governance is a dictatorship where the dictator has unquestioned authority. Our form of governance is not as efficient but is dramatically more inclusive. Our belief is that when shareholders are treated as owners, they act like owners and have a genuine concern for the long-term health and success of their business.