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Updated on: 03 Sep 2021, 11:30
Originally posted by LordStark on 21 Oct 2018, 08:38.
Last edited by Sajjad1994 on 03 Sep 2021, 11:30, edited 4 times in total.
Last edited by Sajjad1994 on 03 Sep 2021, 11:30, edited 4 times in total.
Added q#4 and 5
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Question 1
D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
45%
(medium)
Question Stats:
60% (03:12) correct
40%
(03:18) wrong
based on 551
sessions
History
Date
Time
Result
Not Attempted Yet
Question 2
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
5%
(low)
Question Stats:
80% (00:29) correct 20%
(00:44) wrong
based on 516
sessions
History
Date
Time
Result
Not Attempted Yet
Question 3
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
65%
(hard)
Question Stats:
56% (01:35) correct 44%
(01:41) wrong
based on 517
sessions
History
Date
Time
Result
Not Attempted Yet
Question 4
A
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
65%
(hard)
Question Stats:
43% (01:15) correct 57%
(01:18) wrong
based on 108
sessions
History
Date
Time
Result
Not Attempted Yet
Question 5
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
79% (00:37) correct 21%
(00:54) wrong
based on 97
sessions
History
Date
Time
Result
Not Attempted Yet
Corporate law firms have traditionally billed their clients on an hourly basis. However, in the current economy, it is increasingly common for law firms worldwide to offer clients alternative billing structures. Seeking a competitive advantage, many law firms now earn much of their compensation in the form of an unguaranteed bonus which is paid upon completion of the firm's work and the amount of which depends on the success of that work. The terms of these alternative compensation schemes are documented in engagement agreements that specify the bonus the client will pay the firm given various outcomes of the case. Particularly with first-time clients, a compensation structured on such a bonus can be a highly effective marketing tool, especially if the client is very cautious in selecting legal service providers, a high hourly billing rate is a barrier to client engagement, the firm often loses potential clients to firms with lower hourly rates, or the consequences to the client of a negative outcome are severe.
On the other hand, these bonus-based compensation structures can sometimes hinder law firms' marketing efforts. Sophisticated clients may be wary of firms offering such structures, understanding that the firm may have less incentive to provide independent, objective advice and instead advise the client to take undue risks in the hope of winning a larger bonus payout. Such structures may mislead less sophisticated clients by suggesting that the outcomes of certain cases will necessarily be favorable. A firm's willingness to work for a bonus may even signal to potential clients that a firm is desperate for business. Indeed, law firms with exceptional reputations and a track record of success have little to gain by offering an alternative to the long standing norm of hourly billing.
On the other hand, these bonus-based compensation structures can sometimes hinder law firms' marketing efforts. Sophisticated clients may be wary of firms offering such structures, understanding that the firm may have less incentive to provide independent, objective advice and instead advise the client to take undue risks in the hope of winning a larger bonus payout. Such structures may mislead less sophisticated clients by suggesting that the outcomes of certain cases will necessarily be favorable. A firm's willingness to work for a bonus may even signal to potential clients that a firm is desperate for business. Indeed, law firms with exceptional reputations and a track record of success have little to gain by offering an alternative to the long standing norm of hourly billing.
1. All of the following hypothetical situations exemplify a potential problem noted in the second paragraph EXCEPT which of the following?
a. A law firm's offer of a bonus-based compensation structure leads a client to believe that the success of his or her case is a foregone conclusion.
b. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm has few existing clients.
c. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm may give riskier advice than it would if it were working on an hourly basis.
d. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm is trying to charge more than it would if it were working on an hourly basis.
e. A law firm's offer of a bonus-based compensation structure makes a client suspect that a firm's objectivity may be compromised.
a. A law firm's offer of a bonus-based compensation structure leads a client to believe that the success of his or her case is a foregone conclusion.
b. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm has few existing clients.
c. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm may give riskier advice than it would if it were working on an hourly basis.
d. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm is trying to charge more than it would if it were working on an hourly basis.
e. A law firm's offer of a bonus-based compensation structure makes a client suspect that a firm's objectivity may be compromised.
2. The primary purpose of this passage is to
a. justify the popularity of a behavior
b. evaluate the usefulness of a practice
c. demonstrate how to implement a program
d. discuss the ethics of a business activity
e. explain the reasons for pursuing a strategy
a. justify the popularity of a behavior
b. evaluate the usefulness of a practice
c. demonstrate how to implement a program
d. discuss the ethics of a business activity
e. explain the reasons for pursuing a strategy
3. The passage's description of the issue raised by a bonus-based fee structure for law firms most clearly implies that which of the following is true?
a. Success-based bonuses violate the legal profession's standard of practice.
b. Lawyers working on behalf of a client cannot always determine the outcome of a lawsuit in advance.
c. The dignity of the legal profession is undermined by new legal services that differ from those typically offered in the past.
d. Clients whose cases are not successful cannot be adequately compensated by financial settlements alone.
e. Predicting the cost of legal services is more difficult than predicting the costs of other professional services.
a. Success-based bonuses violate the legal profession's standard of practice.
b. Lawyers working on behalf of a client cannot always determine the outcome of a lawsuit in advance.
c. The dignity of the legal profession is undermined by new legal services that differ from those typically offered in the past.
d. Clients whose cases are not successful cannot be adequately compensated by financial settlements alone.
e. Predicting the cost of legal services is more difficult than predicting the costs of other professional services.
4. All of the following are mentioned in the passage as circumstances in which law firms can benefit from offering a bonus fee structure EXCEPT:
A. The law firm has difficulty retaining its current clients.
B. The law firm has difficulty winning clients over competitors who offer lower hourly fees.
C. Clients perceive a firm's hourly billing rate to be prohibitively high.
D. The adverse effects of a negative outcome of the case are significant for the client.
E. The client is reluctant to quickly sign a contract with a new law firm.
A. The law firm has difficulty retaining its current clients.
B. The law firm has difficulty winning clients over competitors who offer lower hourly fees.
C. Clients perceive a firm's hourly billing rate to be prohibitively high.
D. The adverse effects of a negative outcome of the case are significant for the client.
E. The client is reluctant to quickly sign a contract with a new law firm.
5. Which of the following is cited in the passage as a goal of some law firms in offering a bonus fee structure?
A. minimizing the firm's liability in certain cases
B. successfully competing with other firms
C. justifying increases in total fees paid by clients
D. improving the reputation of the legal profession
E. improving the quality of the firm's legal counsel
A. minimizing the firm's liability in certain cases
B. successfully competing with other firms
C. justifying increases in total fees paid by clients
D. improving the reputation of the legal profession
E. improving the quality of the firm's legal counsel
honneeey
Joined: 23 Aug 2016
Last visit: 06 Apr 2022
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Location: India
Concentration: Finance, Strategy
Schools: Booth '18 Kellogg '18 HBS '18 Stanford '18 ISB '20
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21 Oct 2018, 21:27
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PeepalTree
5:57 Minutes, All correct!
Nice passage!
[/box_in][box_in]1. All of the following hypothetical situations exemplify a potential problem noted in the second paragraph EXCEPT which of the following?
a. A law firm's offer of a bonus-based compensation structure leads a client to believe that the success of his or her case is a foregone conclusion.-Mentioned in second passage.
b. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm has few existing clients-Mentioned in second passage.
c. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm may give riskier advice than it would if it were working on an hourly basis.-Mentioned in second passage.
d. A law firm's offer of a bonus-based compensation structure makes a client suspect that the firm is trying to charge more than it would if it were working on an hourly basis-Correct, not mentioned in second passage but is Mentioned in FIRST passage.
e. A law firm's offer of a bonus-based compensation structure makes a client suspect that a firm's objectivity may be compromised.
-Mentioned in second passage.
2. The primary purpose of this passage is to
a. justify the popularity of a behavior-Popularity is incorrect. Author's tone is evaluative.
b. evaluate the usefulness of a practice-Correct,, usefulness of Hourly billing rate is evaluated by author.
c. demonstrate how to implement a program-How to is incorrect!
d. discuss the ethics of a business activity-Ethics is out of scope over here.
e. explain the reasons for pursuing a strategy-Author didn't explain reasons in favor of one.
3. The passage's description of the issue raised by a bonus-based fee structure for law firms most clearly implies that which of the following is true?
a. Success-based bonuses violate the legal profession's standard of practice.-Nowhere mentioned.
b. Lawyers working on behalf of a client cannot always determine the outcome of a lawsuit in advance.-Mentioned, refer " Such structures may mislead less sophisticated clients by suggesting that the outcomes of certain cases will necessarily be favorable. .."
c. The dignity of the legal profession is undermined by new legal services that differ from those typically offered in the past.Nowhere mentioned.
d. Clients whose cases are not successful cannot be adequately compensated by financial settlements alone.Nowhere mentioned.
e. Predicting the cost of legal services is more difficult than predicting the costs of other professional services.Nowhere mentioned.
22 Oct 2018, 09:02
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3. The passage's description of the issue raised by a bonus-based fee structure for law firms most clearly implies that which of the following is true?
a. Success-based bonuses violate the legal profession's standard of practice.
b. Lawyers working on behalf of a client cannot always determine the outcome of a lawsuit in advance.
c. The dignity of the legal profession is undermined by new legal services that differ from those typically offered in the past.
d. Clients whose cases are not successful cannot be adequately compensated by financial settlements alone.
e. Predicting the cost of legal services is more difficult than predicting the costs of other professional services.
please explain question 3!
a. Success-based bonuses violate the legal profession's standard of practice.
b. Lawyers working on behalf of a client cannot always determine the outcome of a lawsuit in advance.
c. The dignity of the legal profession is undermined by new legal services that differ from those typically offered in the past.
d. Clients whose cases are not successful cannot be adequately compensated by financial settlements alone.
e. Predicting the cost of legal services is more difficult than predicting the costs of other professional services.
please explain question 3!
