Average in-house costs of a group of very large US companies stayed level for nine years?

A report entitled the Litigation Cost Survey of Major Companies, presented at the Searle Center on Law, Regulation, and Economic Growth, (Northwestern Univ. School of Law, May 10-11, 2010) at 7, gives data on expenses of about 48 major law departments. The report includes a graph that shows “Average US In-house Costs” during the nine years 2000 to 2008. With almost no fluctuations, the average stayed near $17.9 million.

It just doesn’t seem plausible that for nine years, years with likely growth in departmental headcount for these large departments, years with compensation rising with the cost of living, years with global dispersion of lawyers and often to expensive locations, years with technology investments, years of stock price appreciation and therefore the value of equity grants soaring, that the inside spend amounts would remain flat.

A footnote to the graph adds a possible statistical explanation: “To account for the unbalanced nature of the response rate over time, a regression with a time trend and company fixed-effects was run.” I think that means because the respondents did not all provide expense information for each year, the analysts “filled in” the missing data by these techniques and adjustments. Perhaps a bit of the anomalous finding is owed to statistical smoothing.

We welcome comments

Your email address will not be published. Required fields are marked *