Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today, we compare a PGA Tour business proposal to Big Law’s prevailing business model. Sign up to receive this column in your inbox on Thursday mornings. Programming Note: Big Law Business will be off next week.
So far, lawyers have been among the few winners in the contentious battle for the future of professional golf.
That’s because the lawyers have been billing hours. The PGA Tour this month turned to Big Law firms to win the first of likely many court battles against its deep-pocketed rival, LIV Golf.
For now, the relationship is strictly in the lawyer-client vein. But as the PGA Tour changes its business model to compete with a financial juggernaut, it’s becoming clear that professional golf has much more in common with Big Law.
Three things come to mind.
1. The PGA Tour and Big Law are both spending large amounts to hang on to top talent.
The PGA appears to be borrowing a page from Big Law’s playbook: Spend as much money possible to appease the most-important stars.
This week, 30 PGA Tour golfers will compete to be crowned the season-long champion and take home what was once the biggest prize in golf: $18 million.
That giant payday is less than a tenth of the largest check LIV Golf has reportedly cut to help lure away the likes of Phil Mickelson, Dustin Johnson, and Bryson DeChambeau.
Law firms can’t imagine that kind of competition. It would be like a firm with $700,000 in profits per equity partner competing against a rival where the average partner earns $7 million.
Those financial differences are what led to a well-worn question for less-profitable firms: What, if anything, can we do to keep our partners from bolting?
Big Law’s answer, by and large, has been to pull up the ladder for future partners and spread out the pay gap between its highest and lowest-paid lawyers—a strategy the PGA Tour is seriuosly considering.
2. Lawyers and pro golfers are both looking for new ways of doing business.
Law firm partners who dream of breaking 100 on the golf course now have this in common with the world’s best golfers: Deliberating on the future of their business model.
A harried players-only meeting of top golfers took place in Delaware last week, highlighted by Tiger Woods jetting in from Florida, to address the threat of further PGA departures.
Their ideas were officially put in place this week, when PGA Tour Commissioner Jay Monahan announced a new category of Tour membership: Top players.
Those 20 “top players” will be eligible for a share of a $100 million bonus program. Those players also committed to playing more tournaments that will cut bigger checks than before out of a now-$20 million purse.
Lesser players—the non-equity partners of the PGA Tour—receive some new perks, too. They’ll earn a $500,000 minimum while they compete to become a top player.
“There’s no doubt that earnings at the highest end of the membership have and will continue to grow at an accelerated level,” Monahan said at a news conference.
In the law world, Cravath Swaine & Moore partners held multiple meetings over the span of years considering whether they should abandon their lockstep pay model and reward their stars.
The firm last year conceded, amid arguably the hottest market for lateral hires in Big Law history, that the market required bolstered pay for the highest-performing partners.
“The velocity of change has just accelerated,” Faiza Saeed, Cravath’s managing partner, told the Wall Street Journal, explaining the change.
There were already questions about whether Tour’s new compensation approach moved too far away from competition.
Asked Rory whether the Tour changes make it less of a meritocracy and more of a popularity contest by being PIP-focused:— Ryan Lavner (@RyanLavnerGC) August 24, 2022
“Just play better. Work your ass off, play better, and you’ll get into these events.”
Meritocracy is important in law firms, just as it is in pro golf. People want rewards for hard work and talent.
The challenge for both industries is to create a system where the winners aren’t pre-ordained and there’s a realistic shot to make it to the top.
3. Big Law’s ownership approach may become the PGA’s future.
Another part of the players’ plan, journalist Alan Shipnuck reported, could include the PGA Tour renouncing its non-profit status and bringing in outside investors—like private equity firms—to offer ownership shares in the PGA Tour to the best golfers.
Like law firms, the PGA Tour in this scenario would create the complex business model where the owners are the primary product being sold.
Sign me up for the off-course drama alone!
I can imagine a book that would describe the sharp-elbowed backroom dealing: “The PGA Tour Partner Track.”
And the snarky website: Above the Cut, where disillusioned young golfers leak emails containing ownership’s latest insensitive demands. (No more shorts for practice rounds!?)
Who knows what criteria the Tour would come up with for earning equity shares. Monahan already punted when asked how the 20 “top players” will be decided going forward—giving lip service to the meritocracy idea.
But if the decision-making process is anything like Big Law’s, it’s not hard to envision a select group of elder guardians making the decisions on, well, a whim.
In that case, ownership would likely go to the select few who’ve shown generational talent, dedication to the business, and friendliness with the most important players.
You don’t have to strain your imagination to envision the world’s 200th ranked golfer expressing a sentiment shared by so many Big Law associates: “I’m never going to be an owner of this business, but it’s a good opportunity to make some money while I’m young and before I find a real career.”
Time will tell if the PGA Tour will stake out a winning strategy by mimicking that of its well-paid counselors.
If they do, it could be quite a show.
Worth Your Time
On Lawyers and Politics: Dan Goldman, the former federal prosecutor and Levi Strauss & Co. heir in today’s New York 10th District Democratic congressional primary, received more than a sixth of donations from the legal industry, Justin Wise reports. Goldman won his primary on Tuesday.
On Tesla’s Lawyers: At least a dozen Tesla Inc. lawyers have left the company this year, leaving Elon Musk with a thinned legal bench as he faces legal challenges, Brian Baxter reported.
On Salt Lake City: Big Law continued its hiring spree in Utah, with Elizabeth Olson reporting Holland & Hart added six lawyers in Salt Lake, where major firms like Kirkland & Ellis, Wilson Sonsini and Mayer Brown have been making headway.
That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.