Reingold & Feinstein found that its overhead and expenses were too high. It decided to hire an experienced law firm administrator to keep costs down and bring the profits of the firm up. As compensation, the firm offered the administrator a salary and a percentage of the profits. If the administrator did a good job, the percentage of the profits could be as much as one-fourth to one-third the administrator’s total compensation. It was believed that such compensation would be an incentive for the administrator to produce greater efficiency and productivity, which would increase profits for the firm.
a. Was the administrator’s compensation proper?
b. What area of the United States would condone such a financial arrangement?
c. What are some possible repercussions of this arrangement?
d. Do any advantages accompany this arrangement? If so, what are they?