Lat had it right last week. There is a big, and growing, partner compensation spread at nearly all Biglaw shops. And as I mentioned in an earlier column, it is not uncommon to make partner and not see a bump in guaranteed pay at all. Factor in the additional expenses Lat references, such as tax and insurance outlays, and the first few years of partnership can be a net loss for some partners. Even if you finance your buy-in. And especially if you were the beneficiary of some big bonuses, for the suicidal hours you had just put in (big profits for your Biglaw firm!) as a counsel or senior associate in order to get elected.
So please don’t assume that every one of the people you see named as new Biglaw partners (usually in a breathless press release, and sometimes even with an ad in the American Lawyer) are signing contracts for their dream “lawyerly lairs” straightaway. If they are, it’s because they have family money or are a two-professional, no-kid type-family. Otherwise, they are headed for some tight times once they realize that they have to pay federal taxes (including Medicare and Social Security), state taxes (often in every state their firm operates), local taxes (for their beautiful new property), and a real accountant who can figure the whole mess out for them.
Most people don’t realize this, and Biglaw is in no rush to pop the fantasy bubble. Better to have associates motivated by dreams of what Lat referred to as “instant riches.” Better to maintain the prestige of the profession by pretending that making partner at a Biglaw firm is a tremendous achievement, regardless of what firm, practice group, or locale. It’s an achievement, sure. Just like getting elected to some political office. But there is a big difference between getting elected to the U.S. Senate and getting elected as deputy tax commissioner somewhere….
When you work in a big city, where many Biglaw shops have sizable offices, it is hard not to be aware of the hierarchy of firms. At the top are the lockstep powerhouses (Simpson et al.), where it is nearly impossible to make partner. For the three or four people a year (sometimes none, proof that making partner at such a firm is a decision with real financial consequences) who make it — enjoy spending your close to a million bucks. You’ve earned it.
That’s the top. At the bottom are the “closed comp” Biglaw shops that start everyone as non-equity and give you the title and a handshake. You want extra cash? Bring in business, but make sure your hours don’t slip. Congratulations — you and forty of your peers have now been entered into a brand new tournament. We can call it the “Equity Games.” The smart entrants in this new competition either hitch their hopes directly to a powerful sponsor in the form of a major rainmaker, or immediately start making plans to move up the chain to a more generous firm. It can be a fun game, as long as your expectations were not of “instant riches” to start with. If they were, it stinks.
And the middle, well, it is the middle. The higher a firm is on the PPP charts, the closer its partners likely are to something approximating the experience of partners at truly top-tier places. Lower PPP? More likely that new partner has to explain to their significant other that they can’t quit their job yet. Even though you had promised them that when you finally made partner you would bankroll their killer mobile app idea. Or their yoga/yogurt/yodeling studio.
It is important to be realistic, because as the MLA survey indicates, it is getting harder and harder to make and keep equity partner status. And the people at the top have no compunction about squeezing their new partners at the bottom by keeping their pay flat, raising their rates so that attracting new business is even more difficult, and making expensive investments in laterals that most likely won’t pan out. But if you can earn the status, you should still grab it, and then figure out how to maximize the benefits. For example, you’ll likely get a very sweet mortgage deal from your firm’s private banking representatives. Not as good as being able to pay cash outright, but it is something.
Now the MLA survey itself is very newsworthy, and full of interesting information. I want to get into some specific analysis of the results over the next column or two. Of course, it is interesting right off the bat that this is only the second attempt at comprehensively surveying Biglaw partners about their compensation. And the first attempt was only two years ago — yet another sign that Biglaw is moving away from the era of Old School Partner-style “true partnerships,” where money discussions were déclassé and considered a threat to cohesion. Biglaw firms are no longer family businesses. So while in your typical family business there is internal transparency and external opaqueness, your typical Biglaw firm is moving in an inverse direction.
In today’s environment of partner “free agency,” any insight to what different teams are willing to pay for talent is very important. It is therefore no surprise that the survey was sponsored and administered by two of the leading drivers (and beneficiaries) of the current free agent model — a leading recruiting agency, and the publisher of Old School Partner’s favorite periodical, the American Lawyer. I am sure they will benefit from the findings. And while the survey may not mean much to a senior partner making seven figures and whiling away the time to retirement, it is important information for people like myself — and everyone else who hopes there is something to inherit out of the current mess.
Feel free to email me regarding your thoughts on the current partnership compensation situation, and what you thought of the MLA survey. Or discuss in the comments below. In next week’s installment, I’ll start digging into the numbers a bit….
Anonymous Partner is a partner at a major law firm. You can reach him by email at [email protected].