Rattling the Gilded Cage

By Richard Lacayo

For the nearly 37,000 graduates who stepped out of American law schools this spring, the most talked about legal decision of the year had nothing to do with the Supreme Court. It was the bombshell dropped last April by the elite New York City law firm of Cravath, Swaine & Moore. By the addition of a $12,000 "housing allowance," Cravath pushed its starting salary to a stratospheric $65,000 a year. Equal or larger increases went to junior lawyers already on the Cravath payroll.

The move jolted the legal profession, especially the expanding megafirms that compete with Cravath for a relatively stable pool of top graduates. In recent weeks a ripple effect has pushed up salaries at major firms across the country. All of this is good news for young associates, the entry-level lawyers who toil for five to nine years in the hope of joining the full partners, who split a firm's profits. But as the new lawyers are just now discovering, this silver lining comes with a cloud. At the big firms that pay those high salaries, associates commonly work at uninspiring tasks, poring over old court decisions and statute books, then drafting memos for the higher-ups. Rarely meeting clients or standing up to argue in court, they dig again and again into the same tiny areas of cases they never approach as a whole. Above all, they work punishing hours. Personal lives go by the wayside as they put in 70-hour weeks, struggling to bill clients for anywhere from 2,000 to 2,500 hours a year.

"After two or three years you figure out that you pay a price for that money," says Dennis Kendig, a partner in the modest-size Los Angeles firm of Sachs & Phelps. "You pay in quality of life." Hard work has always been a hallmark of the legal profession, and the reservoirs of public sympathy for well-paid attorneys are no doubt a trifle shallow. But even soaring salaries can seem a poor return for years spent on the assembly line of the law. The result: some large firms now commonly lose up to one-half of their associates. On Wall Street, for instance, many defect to investment banking, a field that lets them shape the deals they would merely flyspeck as lawyers and earn even more exorbitant salaries. Legal publications are filled with advice on how to soothe unhappy rookies. Business is booming for legal headhunters, who can charge $20,000 and more in fees to replace a single defector.

Straight out of Harvard Law School in 1981, Robert Jason accepted a $33,000 starting salary at O'Melveny & Myers, a Los Angeles-based firm with some 375 lawyers in offices on both coasts. Large firms appeal to clients in part by offering them expertise in minute and sometimes arcane legal specialties. Jason found himself assigned to municipal-bond tax law. "A total dead end," he now moans. Even worse, he maintains, at a large firm "associates do the absolute dregs of the work-- six months at a time in a warehouse looking through documents." Following an increasingly well-worn path, Jason fled his big firm in 1984 for a smaller shop, in his case the 32- lawyer firm of Hill Wynne Troop & Meisinger, where, he says, responsibility comes sooner. His conclusion: "All the stuff you put up with at the large firms is not worth it."

But large firms dominate the field. Two decades ago, Shearman & Sterling may have been the nation's largest law firm with just 160 attorneys. Today many have more than 250. While firms expand by adding partners, most of their growth comes through the addition of associates, their most profitable asset. Associates may earn perhaps $30 an hour, but a firm's clients may be charged $100 or more an hour for their services.

With profit margins like that, firms are sorely tempted to hire associates in numbers out of proportion to the increase in partners. Ratios of 7 to 1 or 8 to 1 are not uncommon, meaning that an ever smaller fraction of associates can count on "making partner," their chief goal and the prime justification for enduring the hardships of the early years. Meanwhile, the drain of recruits jumping ship after a few years has become a bottom-line issue for the firms. "At best it isn't until the third year that you begin to make money on an associate," says Roger Feldman, managing partner at Boston's Gaston Snow & Ely Bartlett.

Recognizing that the problems of their associates have increased in proportion to the bounding growth of the firms, many big firms are trying to act smaller. The legal world of Los Angeles, which likes to bill itself as a humane alternative to the sweatshops of Wall Street, is a case in point. O'Melveny & Myers, the firm abandoned by Robert Jason, now assigns individual partners to act as advisers and buddies for each of its associates. "In a smaller firm it happens naturally," says O'Melveny Partner Robert Vanderet. "Here we're trying to give it a little push."

Across town at the somewhat smaller firm of Wyman, Bautzer, Rothman, Kuchel & Silbert, associates are given some less complex cases to steer on their own. And at Latham & Watkins, which boasts one of the lowest attrition rates in the profession, associates move through several legal specialties before choosing the one they like best. They also serve on committees that make recommendations concerning raises, bonuses and promotions. "We get them involved in the management of the firm right away," says William Meeske, the Latham partner in charge of hiring. "We want them to stay." Ironically, the current salary competition touched off by Cravath may help to spread such practices. As more firms find themselves unable to match the amounts promised by the league leaders, they can be expected to lure recruits with the promise of a more satisfying work life. In the end, that may look better to law school graduates than high numbers on a paycheck.

With reporting by William Hackman/Los Angeles and Jonathan Wells/Boston