Making Partner Less Likely as Big Law Firms Face Cash Crunch
By Carlyn Kolker
Feb. 17 (Bloomberg) -- Making partner, the brass ring for law firm associates who toil slavishly for a decade after law school, has become an elusive dream as shrinking revenue cut promotions at some of the largest U.S. firms.
Partner compensation is derived from profits and isn’t fixed. With less money to divide among them as the recession forced clients to cut costs, partners have grown reluctant to increase their own ranks by promoting salaried attorneys or even non-equity partners who can get some of their pay from profits.
Dewey & LeBoeuf LLP in New York announced it was promoting only six attorneys to equity partner in December, down from 20 a year earlier. Mayer Brown LLP in Chicago said it promoted 14 attorneys to partner in November, down from 27, and Orrick, Herrington & Sutcliffe LLP in San Francisco announced seven partner promotions this month, down from 15 a year ago. Revenue at U.S. firms was forecast to drop as much as 10 percent in 2009, according to a survey of 131 firms by Citi Private Bank’s law firm group.
“Firms become more cautious in a downturn, so you are less inclined to promote from within,” W. Christopher White, chairman of Cadwalader, Wickersham & Taft LLP, said in a phone interview.
His New York-based firm promoted four attorneys to partner last month, down from six in December 2008. While Cadwalader’s overall revenue declined, average per-partner profit rose from $1.9 million in 2008 to $2.4 million, White said.
Fewer Equity Partners
The firm cut expenses and had fewer equity partners than in the previous year, White said.
The recession also reduced the appetite for so-called lateral hiring, or bringing on lawyers from other law firms, White said. Cadwalader made no such hires in 2009, he said.
Partnership ranks at other large firms either remained static or had smaller increases than in previous years.
Cravath, Swaine & Moore LLP didn’t promote any attorneys to partner, according to a person familiar with the firm’s hiring practices. The New York-based firm declined to comment in an e-mailed statement.
Latham & Watkins LLP, a Los Angeles-based firm of about 2,000 attorneys, announced 23 promotions to partner in November, down from 30 in 2008, according to the firm’s Web site. Jay Staunton, a spokesman for Latham, declined to comment.
“When profits are down, firms may be reluctant to make more equity partners because they are going to have to split the pie more ways,” said Kent Zimmermann of the consulting firm Zeughauser Group.
Firm Profits
Average profit per partner at Mayer Brown, Dewey & LeBoeuf, and Orrick Herrington all exceeded $1 million in 2008, according to the most recent survey data from the trade magazine American Lawyer.
Herbert Krueger, chairman of 1,750-lawyer Mayer Brown; Elyse Blazey, a spokeswoman for 1,100-lawyer Orrick Herrington; and Angelo Kakolyris, a spokesman for 1,200-lawyer Dewey & LeBoeuf, declined to comment.
Some firms that fired salaried lawyers in 2008 and 2009 because of the recession decided to create fewer partner positions because they wanted to retain a fixed ratio of partners to associates, said Zimmermann, who is based in Chicago.
The climb to partnership varies by firm and typically lasts from eight to 10 years, according to Ward Bower, a consultant at Newtown Square, Pennsylvania-based Altman Weil.
In deciding whom to promote, firms consider the quality and volume of a lawyer’s work, how much business an attorney brings in, and activities such as mentoring, training and service on committees, Bower said.
“It’s not enough to be a good person, to be a good lawyer and work a lot,” the consultant said.
Daniel F. Hunter was the only attorney to be elevated to partner this year at New York’s Schulte Roth & Zabel LLP, the firm said in a statement.
2,382 Hours Billed
Hunter said in a phone interview that he billed 2,382 hours last year and helped form hedge funds and private-equity funds for clients. He also carved out a niche in counseling hedge funds about distressed-debt investments.
“It was a tough slog,” Hunter said of making partner. “When it looked touch and go, I kept telling myself: ‘It’s not you. It’s the economy.’”
Some firms emphasize how well an attorney fits into the firm’s culture when selecting partners, Zimmermann said.
Cleveland Airport Rule
“I’ve heard it called the Cleveland Airport rule -- is this someone you would be comfortable spending time with if your plane was stuck in the Cleveland airport?” he said.
A law firm can spend months vetting partner candidates and typically assigns a committee to oversee the selection process.
“It’s a long, deliberative process that requires extensive collaboration over the better part of a year,” said Hugh Verrier, chairman of New York-based White & Case LLP.
His firm bucked the partnership trend, announcing 33 partner promotions in December, up from 21 a year earlier.
“We slowed down and adjusted a year ago, and now’s the time for growth,” Verrier said. “We felt the level of business is stronger and the prospects are more positive than negative.”
To contact the reporter on this story: Carlyn Kolker in New York at ckolker@bloomberg.net. |
