Thirty years ago, New York was a scary place for me — mostly because I’d never been there. Midwestern curiousity led me to interview with Cravath, Swaine & Moore’s on-campus representative.
I’d heard that its road to success was the toughest. Rumors circulated that it hired twenty new attorneys for every one or two it might promote to equity partner eight or more years later. Not surprisingly, most of my fellow Harvard students regarded Cravath as the quintessential competitive sweatshop — a characteristic that many of my peers actually found attractive.
Not me. I went elsewhere because, in those good old days, there was an elsewhere to go. Cravath is probably not much different from what it was back then. It’s just that most of the biglaw world has followed its example. As other top-50 firms tightened equity partner admission requirements, Cravath just kept doing what it had always done.
Why did firms emulate Cravath? Law student lore made it the best by some undisclosed criteria. In retrospect, I think money had a role. Even back in 1980, it was one of a very few firms where advancement to equity partner meant wealth that was immense, at least for a lawyer.
According to the first ever listing of the Am Law 50 in 1985, Cravath ranked 2nd in profits per partner with $635,000. For those behind it, the descent was steep: the #10 firm was under $400,000; #30 was $255,000; #50 was $170,000.
Cravath blazed a trail to riches that now accompany those who reach biglaw’s summit: average equity partner profits for the entire Am Law 100 exceeded $1.26 million last year.
But Cravath remains different. Most of biglaw moved to two-tier partnerships and eat-what-you-kill systems where a few key metrics — billings, billable hours, and leverage ratios — now determine individual equity partner compensation. Cravath’s single-tier model has reportedly remained lock-step: admission to its partnership means fixed financial rewards over an entire career without regard to individual books of business.
I don’t know if Cravath’s lawyers as a group are any happier than attorneys in other big firms. But the firm is now courting its Generation X’ers. According to the Wall Street Journal, partners in their late-30s and early-40s have “taken a more pro-active approach, building new relationships and handling much of the work that historically would have been taken on by partners in their 50s.” (WSJ, May 28, 2010, C3)
Referring to Cravath’s deferential culture in which young partners traditionally forwarded big deals to older colleagues, the article notes that senior partners have nurtured the new environment that gives younger lawyers earlier name recognition.
Why has it worked so far?
“The older attorneys didn’t mind, partly because the pay they received didn’t get cut as a result,” the Journal observes.
In other words, lock-step allows elders to step out of the spotlight without hits to their pocketbooks.
In the current biglaw world, Cravath’s experiment is risky. Will young partners remain loyal or use their newly gained client power to pursue financial self-interest elsewhere? Will Cravath be forced to modify or abandon lock-step so that it can retain young partners controlling clients and billings?
I don’t know. Equally significant, I suspect those most directly affected by what the article characterizes as a “sea change at one of the best-known and most conservative of white-shoe law firms” don’t know, either.
And what does it mean for new associates trying to understand how this affects the firm’s culture and their own career prospects?
Ah, the things I didn’t think to consider when I was a second-year law student looking for a job about which I knew almost nothing.
Fortunately, students are wiser now, right?