In this week’s New York Observer, there’s an article (by yours truly) that may be of interest to ATL readers. It’s entitled Profits vs. Partners: Are the country’s top law firms going the way of the dinosaur?
You can check it out by clicking here. The piece has also been picked up by DealBook and the WSJ Law Blog (with a somewhat snarky title — but if we can dish it, we can take it).
The point of the article is not that law firms are becoming more businesslike and profit-oriented (yawn), but what this means for the profession — and also for firms as profit-maximizing businesses. Here’s an excerpt:
It’s a noteworthy shift for the legal profession, whose denizens like to think of themselves as intellectual types—and view their Wall Street cousins as money-obsessed philistines. Many angst-filled attorneys suspect they should have gone into something more tweedy and creative than relocating commas within merger agreements. As Clarence Darrow said, “Inside every lawyer is the wreck of a poet.”
Such questions of professional identity aren’t just theoretical; they have ramifications for law firms as businesses. If law firms become “just like banks,” but with smaller paychecks, firms may lose their appeal to the talent they must attract in order to thrive.
In other words: Is Biglaw, by emphasizing money so much, hoisting itself by its own petard? If it’s all about the benjamins (baby), why not just go to an i-bank or hedge fund? Are firms going to lose their top talent to the world of finance — which would then impair Biglaw’s ability to thrive as a business?
(If Biglaw has nothing to offer but monetary rewards, which are offered in larger amounts by Wall Street, will law firms end up as dumping grounds for the mathematically-impaired? (Please don’t take offense; that includes us. We can’t balance our checkbook without a calculator.))
More excerpts and discussion — including predictions from law firm consultants about when the next round of associate pay raises is coming, which we know you’re dying to hear — after the jump.
From a partner at a top New York law firm:
“The law firms in this culture place so much emphasis on compensation,” said the young partner in New York, who insisted on anonymity, like many of the lawyers contacted for this story, because of firm policies against talking to the press. “But if you end up putting money as the aspiration, inevitably money takes on a power that can transcend the greatness of the craft that you’re learning. When money is what motivates, and money is offered in a higher quantity, people will take the money.”
And this is why Biglaw associates, even at such legendary (and profitable) shops like Wachtell, are jumping ship for investment banks, hedge funds, and private equity.
Oh yes, the promised speculation on associate pay raises:
Associate starting salaries have been climbing fast. In January, Simpson Thacher led the latest round of pay raises, which took starting salaries from $145,000 to $160,000. That came less than a year after the previous raise, led by Sullivan & Cromwell’s move from $125,000 to $145,000. In both cases, everyone quickly followed the leader.
But given firms’ seemingly insatiable demand for new recruits, expect more raises in the not-too-distant future. Peter Zeughauser [of the Zeughauser Group consultancy] believes the next raise will be to $200,000 and could take place “as early as within the next six months. On the outside, 12 to 18 months. And a move to $250,000 after that.”
These are just excerpts. You can read the entire article — plus a sidebar on five ex-Biglaw lawyers now doing different things, from baking cakes to stand-up comedy — by clicking on the links below.
Profits vs. Partners: Are the country’s top law firms going the way of the dinosaur? [New York Observer]
Sidebar: Do You Believe in Life After Law? [New York Observer]
For Lawyers, Boom Also Brings the Blues [DealBook / New York Times]
Breaking News! Big Law Is More Global & Profit-Focused [WSJ Law Blog]