Making Partner -- Not the Tenured Position It Once Was

Graduate School Law School
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<p>This is an exerpt from today's Wall Street Journal law blog:</p>

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De-Equitization: A Buzzword Sweeping Big Law Nation
Posted by Peter Lattman

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“Most lawyers set on pursuing careers in elite firms have long focused on one goal: making partner. Now they are adding a second one: staying partner.”

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“As corporate firms across the country with ambitions to grow and boost profits have aggressively and publicly thinned their partner ranks, the word has stoked a new sense of vulnerability among lawyers,” Koppel writes.

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Exhibit A: Mayer Brown fired or demoted 45 partners (about 10% of the equity partnership) earlier this year to “drive our ’stock price’ up,” in the words of its chairman. Exhibits B and C: Jenner & Block and Powell Goldstein also recently demoted or fired partners. Here’s the whole story, but here are four money quotes: </p>

<p>The expectation had always been that if associates worked like pack mules for seven or eight years, the stars among them would have a shot at being anointed an “equity partner,” who derives his or her income largely from the firm’s profits. Now, that climb has not only gotten longer — often nine years or more — but the ladder, once climbed, can be yanked away. </p>

<p>“Partnership is no longer a tenured position,” says Michael Boone, a member of the board of Haynes and Boone in Dallas, which has at times demoted partners or has asked them to leave. “You have to get up every Monday morning and prove yourself all over again.”

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David Richards, a New York real-estate lawyer (and renowned Kipling collector), was at Sidley Austin for 17 years when he was demoted in 1999. “It was surprising and hurtful,” he says. “I thought I had been a good soldier.” He was allowed to remain at the firm until the end of 2000 in a reduced capacity. He is now a partner at McCarter & English, where he says there is less pressure to bill at high rates. “McCarter is more sympathetic to middle-market practices and rates than a large firm trying to keep up its ’stock price,’ ” he says. “Formerly, firms tolerated [lulls]. Now they don’t.”
“Mayer sent a message to all lawyers, including associates, that partnership is not a pinnacle,” says Jonathan Asperger, the firm’s former marketing director. “Partners are expected to continue to climb by either bringing in new business or developing skills for which there is a strong market demand.”

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<p>Personally, I think this is a healthy thing. If being a law firm partner was anything like being a tenured professor, that must mean that there was a lot of dead wood within law firms. Certainly there are quite a lot of tenured professors, even (or perhaps especially) at the top schools who, frankly, are not being academically productive. They may be productive in their side endeavors - i.e. consulting, starting their own companies, serving on the boards of companies or as general partners in VC or PE firms, writing mass-market (as opposed to academic) publications, and so forth, but not productive from an academic standpoint. For example, I can immediately think of one tenured engineering prof at MIT who shall remain unnamed who is quite open about the fact that he wants to spend the minimal possible time on academics and instead prefers to spend his time doing VC work. But since he's tenured, MIT can't get rid of him. Plenty of other schools have the same problem.</p>

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<p>In most of the big firms, the actual share of the profits an equity partner gets depends on how much he/she bills, or on how much rain he/she makes. the result is that there is little real deadwood.</p>

<p>This is something different. Now that The American Lawyer publishes an annual survey of profits-per-partner, a firm's overall prestige can suffer if it has too many partners who are trying to achieve a balance between life and work. </p>

<p>Part of the fall-out of this trend will be fewer equity partners with children, or at least fewer that have children that they actually get to spend any time with.</p>

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<p>This has been going on for years, but what is different here, is that it is being done in the open. It is rare to see such an announcement and calling it a "restructuring." That makes it seem more like they are operating more like other businesses - rather than a partnership. Of course, true partnerships at the largest firms have not existed for many, many years.</p>

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<p>The difference now is that "de-equitizing" partners is happening to huge chunks of a given partnership. In some firms, as many as 10-25% of its partners are having their equity partnership rights taken away from them at one time. I have worked with some partners who were de-equitized last year, and I would hardly characterize them as dead wood. In fact, at the firm I am thinking of, entire practice groups were de-equitized without warning. </p>

<p>I guess the takeaway is that there is no longer any light at the end of the tunnel for many young lawyers at big law firms (or the light may simply be extinguished at any time, even after you think you have jumped over that final hurdle to partnership).</p>