$370’000 per hour

That lawyers among other professionals can charge exorbitant hourly rates for their work is nothing new. But what the three law firms representing Richard Tornetta, the Tesla-investor who while holding 9 shares only in 2018 successfully sued the company over Elon Musk’s $56 billion compensation package now claim is nothing short of outrageous!

In total it seems 37 lawyers and other legal professionals were working on the case for something like 19’000 hours (or just about 511 hours per person), requesting now a staggering $7 billion in compensation – or some $370’000 per hour (I have derived the number of hours worked from the total claim and the stated hourly rate). And if you think they are greedy, well actually they are maybe not: According to US law they could have asked for up to a third of the challenged amount or roughly $18.6 billion (you can work out the possible hourly rate on this basis yourself).

Lawyers in any case don’t come cheap (particularly the good ones): Some partners at prestigious law firms in major financial centres like New York, London, or Hong Kong have rates that exceed $1’500 per hour. Occasionally, top-tier legal professionals with unique expertise or those handling critical cases may charge even more than $2’000 per hour. And other professionals don’t come cheap either: Management consultants from leading firms such as McKinsey & Company, Boston Consulting Group (BCG), or Bain & Company can have high hourly rates. Senior consultants or partners in these firms often charge upwards of $1’000 per hour. Some niche consultants with highly specialized skills and significant industry experience might charge more, sometimes reaching $2’000 per hour or higher. And also medical specialists, financial advisers and investment bankers at prestigious firms can bill in the region of $1’000 per hour. But, in any case, we are very far off the $370’000 per hour mark.

Or you become a motivational speaker, a field particularly popular with former politicians: Boris Johnson, a former Prime Minister of the United Kingdom, has been known to charge around £150,000 to £250,000 per speech. Assuming a typical speech lasts about an hour, this translates to an hourly rate of approximately $190,000 to $315,000. But former US Presidents do even better, with Bill Clinton having apparently earned $750’000 for a single speech and Barak Obama reportedly commanding speaking fees in the region of $400’000 to $600’000.

I do get it, former prime ministers, presidents, captains of industry and others have no doubt a lot to tell. But is it all noteworthy? Does it change anyone’s life? Probably not, where as a surgeon, a financial adviser, a consultant or even a lawyer may have a direct impact on your life. But it’s probably a bit like in football: If nobody were watching the beautiful game, top league players wouldn’t command the salaries they do. As a result celebrity status, however achieved, translates into potentially outrageous earnings. And then US courts are known for their outlandish compensations and punitive damages, although these by subsequent instances often get reduced to much more moderate amounts. In Tesla’s case, a lawyer is making the assumption that $13.6 million would be a reasonable enough compensation.

So Tesla’s own lawyers obviously are challenging the $7 billion demand, and they do this undoubtedly for a much lower fee. Its shareholders in June nevertheless approved Mr Musk’s $56 billion package (Richard Tornetta no doubt didn’t). Judge McCormick of the Delaware Court of Chancery will rule in the coming weeks or months.