'Partner' and other Big Law euphemisms

Jack L.B. Gohn, The Daily Record Newswire

Despite a mostly placid surface, the most recent of the “Law Firms in Transition” reports issued annually by law firm consultancy Altman Weil is alarming. True, it starts with the unstartling observation that larger firms continue to change in response to changing market conditions, and that anodyne tone continues.

But then you start recognizing the unspoken norms and assumptions informing the report – and those are chilling.

The report is based on a survey propounded only to firms of 50 lawyers or more, and responded to by, among others, 49 percent of the 350 largest law firms, so it reflects the world and the thinking of Big Law. I myself labored in firms large enough to receive the survey until 22 years ago, and the report reminded me of an old Steve Stills lyric: “You are living a reality I left years ago/ It quite nearly killed me.”

Around the time I left, for instance, I was just beginning to hear of a concept called the “non-equity partner.” That once-novel status is now reportedly a feature of the structure of nearly all Top 200 law firms. By definition, the phrase must, at a minimum, mean that the partner does not receive “equity,” which equates roughly to ownership.

But wait: that’s contradictory, isn’t it? How can you meaningfully be a partner without a share of ownership? Neither in classical partnership structures nor in limited partnerships can you call someone a partner who owns no piece of the partnership control or profits.

In practice, what the term means is someone who receives salary and does not get a piece of the end-of-year profits. But, as noted, true partners divide profits. Anything less is simply a salary, and shouldn’t be called an incident of partnership. Economically, then, a non-equity partner is simply a mislabeled employee. There may be enhanced status attached to the label, and perhaps greater job security but still what we’re really talking about differs at best in such particulars from the status of an associate.

Whenever something is persistently mislabeled, it’s time to take alarm. Non-equities become that way to assure that the rich get richer, that the haves have more, and the have-nots have less.

This transfer of wealth and power is happening as we speak. Quoth Altman Weil: “Almost half of firms are taking the ... step of de-equitizing full partners, moving them out of the profit-sharing class.”

Are we feeling Hobbesian yet?

‘Counseled out’

It gets worse, as one flips through the report. One learns, for instance that “[c]ompensation adjustments are being used in most firms to deal with underperforming partners...” That phrase “deal with” makes it sound as if “underperformance” were some form of misbehavior that the headmaster will need to address. But actually it can get worse. We learn that “chronic underperformers are being counseled out of their firms.”

Don’t slip and fall in all that euphemism. To say directly what the people at Altman Weil were too squeamish to: Firms are earning less than their shrinking class of true owners, the “made men,” wish, and lawyers perceived as not contributing enough to satisfy the overlords are being penalized for this supposed shortcoming by being fired. Not “counseled,” for heaven’s sake. Few people leave jobs they want to keep because they have been “counseled.”

Why would anyone with his or her eyes open spend years trying to become an owner if that ownership was so evanescent? If the value and even the survival of one’s “ownership” were so dependent upon the favor of people who prosper more when one loses it?

Then too, work just seems not to be there for (oh, surprise!) the non-equity partners. Altman Weil says: “62 percent of firms report their non-equities are not sufficiently busy, including 80 percent of the firms with 250 or more lawyers.”

I grant it is possible that purely by chance and by some amazing coincidence the people who aren’t given a true stake in the business are so consistently the ones with too little work. But a more sensible bet would be the big guys are hoarding the work because they want to stay the big guys. And when the non-equities aren’t busy enough because the equities don’t share the work, guess whom the HR manager, will call next into his study?

Refugees in Small Law

I’ve singled out non-equity partners, but actually there is a full trough of job titles for people who, most often, become losers in this brave new world: “of counsel” and “senior partner” and “staff attorney” and “permanent associate” and “contract attorney” and many more.

Most people my age didn’t understand any of this when we started practicing law. There was another, more colloquial sense of the word “partnership” that we thought we were aspiring to: everyone working towards a common goal and a common benefit. Well, silly us! If the Altman Weil profile is to be believed, the risks of the biggest legal enterprises are now being increasingly spread over the whole group, and the bulk of the benefits are being enjoyed by only a diminishingly few members.

From my observation, most of the refugees to the world of Small Law such as myself have, in one way or another, tried to create workplaces that were about their owners. All of their owners. In the Small Law world, partnership truly means ownership. In the Small Law world, partnership means receiving a fair share of the firm’s proceeds and enjoying a fair share of the say in running the show, and relying on genuine job tenure.

To be sure, Small Law practitioners seldom have access to the huge clientele or the big money their bigger brothers and sisters do. At least up until that moment the Big Law “partner” is “counseled” out the door, he or she will probably earn more than we Small Law folk do. But in terms of what makes practicing law worthwhile, from where I sit, foregoing those extra dollars seems like a bargain.

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Jack L.B. Gohn is a partner with Gohn, Hankey, Stichel and Berlage LLP. The views expressed here are solely his own. See a longer version, with links to his authorities, at www.thebigpictureandthecloseup.com.

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