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Market capitalization per lawyer: its association with total legal spending per unit of revenue and numbers of lawyers

Starting with data from 39 large US and Canadian manufacturing companies that participated in the General Counsel Metrics benchmark survey in 2010, I took their market capitalization and divided it by their number of in-house lawyers. At the median, those companies had about one-quarter billion dollars of market cap per lawyer (the average was $346 million).

The correlation between market value per lawyer and total legal spend as a percentage of revenue was a modest 0.39, which suggests softly that the higher the market values a company’s shares outstanding the more the company spends on internal and external legal costs. This finding belies my constant reference to economies of scale.

A negative correlation results between market cap per lawyer and lawyers per billion of revenue. That correlation was a very slight -.13: as market cap rises, in-house lawyer numbers decline a bit. Companies well regarded by the stock market do not scale up their lawyer ranks as their market cap swells – in fact, they need slightly fewer lawyers to support their increasing revenue.

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