Since the Great Recession, it’s far too often that the public hears tales of horror about lawyers drowning in debt. We think it’s time for a change of pace. There are plenty of lawyers out there who have really made it financially — in case you’re mistaken, these people aren’t millionaires, they’re billionaires. These people would laugh at the thought of people suffering under the weight of six puny figures of law school loans.
As luck would have it, there’s a way to keep track of these luxurious creatures. Earlier this week, Forbes released its annual list of the richest people in America, the Forbes 400. Each year, we pore over the list to find the wealthiest lawyers, and in 2014, legal eagles continue to make a strong showing.
Which lawyers made the list this year? Keep reading to find out…
I think we’ve long known that law is a refuge for people who are afraid of numbers. People who are good at math don’t borrow hundreds of thousands of dollars for a shot at winning the bi-modal salary distribution lottery and a job that they’ll most likely hate. I don’t think we needed a longitudinal survey to show that.
Studying law is hard, and your financial success is somewhat directly tied to the amount of hours you work. A banker can earn money in his sleep. A lawyer has only 24 hours in a day to bill. If your family makes a lot of money, aren’t you supposed to get an anthropology degree and work for an NGO? Why would you slum it with the social climbers trying to get into the upper middle class, one deal sheet at a time?
(A stock photo of a teen driver — not actually Ethan Couch.)
I’m sure that by now you’ve all heard the story about the wealthy white teenager who killed four people while drunk driving. As we mentioned in yesterday’s Non-Sequiturs, 16-year-old Ethan Couch got off — sentenced to therapy — because the judge agreed that the kid was a victim of “affluenza”: his parents gave him everything he wanted, and he believed that being rich meant that he wouldn’t have to face consequences for his actions.
The kid’s not wrong; the fact that he’s not facing incarceration for killing four people kind of proves the point. A poor white kid would be in jail right now. A rich black kid would be in jail right now. A poor black kid would be picking out items for his last supper right now. Anybody who thinks that this kind of lenience would be given to anybody other than a wealthy white dauphin is wrong and stupid (and probably racist). The rich kid isn’t in jail because rich people don’t suffer the full force of consequences for their actions.
That said… the judge isn’t wrong either. When you have a jerk-off prick of a 16-year-old, as this kid appears to be, it’s probably not his fault. Not really. My outrage isn’t that Couch is getting off, it’s that so many other teens and young people are being incarcerated without this kind of compassion.
Not that there aren’t people who deserve jail time behind this. It’s just that those people are Couch’s parents….
Wouldn’t it be nice to be a member of the Forbes 400, the richest people in the United States? Then you can party on a yacht with models and bottlesdonate $20 million to the law school that helped launch you along the path of professional success.
* Jamie McCourt, a former family law attorney, strikes out in trying to set aside her divorce settlement with Frank McCourt, former owner of the Los Angeles Dodgers. She’s stuck with $131 million and several luxury homes. #richpeopleproblems [National Law Journal (sub. req.)]
* An inquest reveals that a Hogan Lovells partner who took his own life had warned a colleague that he was going to kill himself the day before his death. [Daily Mail via ABA Journal]
* If you’re in New York this weekend, go see Arguendo. Or buy tickets for the 7 p.m. performance on September 22, when I’ll be doing a talkback with artistic director John Collins after the show. Enter the discount code “ABOVE” for $35 tickets (a special rate for ATL readers). [Public Theater]
The most shocking result of the recent survey on partner compensation conducted by Major, Lindsey & Africa was how much better the average partner does in firms with open compensation systems — almost $350,000 better on average, year in and year out. To me, that is the difference between retiring at 55 or 65. A big deal.
Have some fun. Tell your average law student that the average compensation for Biglaw partners at closed compensation shops (irrespective of equity status and seniority) was only $465,000, and see the reaction. Or pop an associate’s bubble. And realize that with demand for Biglaw services trending down, there is only so much time left before partner compensation generally starts to take a hit. I always knew about the disparity between open and closed firms, and I had heard about it anecdotally (I think Lat mentioned in an article a few years ago a personal friend who saw his comp climb dramatically after lateraling away from a closed comp firm). But I never really appreciated the scale until this survey came out.
I would think that anyone (especially younger partners with growing books) who could get out of such a firm would at least be trying to (ergo the need for a growing book). Even if your numbers are stellar, and your book is growing along with your traditional working collections, it is too easy for a closed comp chieftain to declare that you need to repeat the performance to make sure its sustainable. Whereas in a open system, you have leverage right away, and can convincingly argue to the compensation committee that failing to reward you would risk discouraging other potential achievers. And that you will leave — but one needs to be subtle on that front. Threaten to leave a closed comp place, and if they really like you, they’ll offer to match whatever new offer you get (thereby confirming they have been skimping on you all along)….
The recent survey on partner compensation conducted by Major, Lindsey & Africa, which I discussed last week, is full of interesting information. First off, I never really knew how many Biglaw partners there are. The answer? Around 75,000, which includes partners from all firms ranked on the Am Law 200, NLJ 350, or Global 100 in the last five years. Throw in another 1,000 or so partners who were Biglaw partners but left to form high-end boutiques — not included in the survey, but I consider them Biglaw partners since they typically work for similar clients — and you still have a pretty small number relative to the number of lawyers in the world. The figure of 75,000 amounts to less than two years’ worth of new U.S. law school graduates.
Very interesting, especially considering the forty-year-or-so age spread between active partners. Seriously, how realistic is it for any one law graduate (irrespective of pedigree) to think they will beat the odds and eventually make partner? So many things need to go right — it is amazing.
Last week, we searched this year’s Forbes 400, the list of the 400 richest Americans, for lawyers and law school graduates. Lat pointed out the newcomers and the dropouts since last year’s roundup, but there are still more than thirty other lawyers on the list.
Let’s take a closer look at these affluent attorneys. Their stories will either inspire you with visions of vast wealth or afflict you with jealousy at how many times over they could pay off your loan debt….
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….
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