X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
When William Hoehler started work as an associate at San Francisco’s Pillsbury Madison & Sutro in 1972, he envisioned an extremely simple career path: “I expected to stay until they carried me out,” the 57-year-old trusts and estates specialist says. But when changes at Pillsbury put a new focus on the bottom line and productivity in the late 1990s, Hoehler was pressured to shift gears. Despite being fully occupied with work for corporate executives, institutions, and established San Francisco families, the firm was eager for Hoehler to expand and provide executive compensation services for, among others, the new breed of young, high-tech millionaires. Unable to get adequate associate assistance for his core practice, Hoehler felt no alternative but to move out. “They didn’t want to grow the trusts and estates department,” he says. “I needed help.” In March, after 27 years at the firm, Hoehler left his partnership to join San Francisco’s midsize Hanson, Bridgett, Marcus, Vlahos & Rudy as of counsel. Hoehler remains remarkably understanding about the business pressures that led Pillsbury to emphasize more lucrative areas like intellectual property, complex litigation, and sophisticated corporate work — where premium pricing, leverage, and higher billables are the norm. “I think it was a right call,” he says. Others of his generation have not been as forgiving or flexible about such changes. But they’d better get used to them. As the baby boomers edge toward retirement age, benefits such as lifetime tenure that were once taken for granted are likely to become relics. The pressure for growth is relentless, and the deference paid to seniority is scant. In an effort to maintain — or gain — footing in an increasingly competitive environment, some firms, like Chicago’s Sidley & Austin [see "Seniority Complex,"], are taking dramatic, highly visible actions that fall hardest on older partners. At other firms, the shift has been more gradual and less obvious, as selected individual partners are privately presented with a choice: take early retirement or become of counsel. “There are a lot of real quiet tragedies — people in their fifties who are severely disappointed,” says Robert Hillman, a professor at the University of California-Davis School of Law who has written extensively on partner withdrawals and law firm breakups. “They don’t have a lot of choices. The ground rules have changed. A middle-aged lawyer who does not have a book of business is not somebody who can command a premium in the legal business.” But the fallout even affects the most powerful middle-aged lawyers. In fact, for lawyers of all ages, the working environment has become less hospitable. And the pressure is growing: for more new clients, more billable hours, transfers to other offices, demands to be accessible anytime, anywhere. It all contributes to a vacuum where collegiality and personal relationships once stood. It also cuts careers short. Given the stress of modern practice, that may not be such a terrible thing. “Since Moses descended with the tablets under his arms, the legal community has never been under such dynamic change,” says Whitney Pidot, 56, managing partner at New York’s Shearman & Sterling. “The history was that people died with their boots on. … The idea of the old graybeards sitting around to age 90 is gone.” Traditionally, it was easy for law firms to accommodate senior partners. There weren’t that many of them, first of all, and few people felt much resentment about paying homage — and a pension — to an elder statesman. But all that’s changing. When the structure of the modern law firm and its pyramid staffing paradigm was beginning to germinate early last century, the average life expectancy in the U.S. was 47 years, according to the National Center for Health Statistics. By 1950, it had risen to 68, and by 1997 was up to 76. Meanwhile, according to the U.S. Census Bureau, the number of Americans age 65 and older has increased from around 16 million in 1960 to 34 million in 1999. Projections estimate that by 2030 there will be approximately 70 million Americans age 65 and older — some 20 percent of the U.S. population. Many of them will be lawyers. As the data analyzed by our contributing editor Marc Galanter [see "A Road Map,"] illustrates, the number of people entering the profession has increased steadily since 1960. By the year 2020, he estimates there will be more than 1.2 million lawyers in the U.S. To see more clearly how the demographic future will look for our readers, we tallied up the ages of partners at nearly one-third of the Am Law 200 law firms. [You can see the results in the pie charts linked to this article.] Not surprisingly, we found that the bulk, 78.6 percent, fall between the ages of 36 and 54. Some of these baby boomers will remain productive and unwilling to slow down, while many will be delighted to retire and pursue new ventures. Others may be bitter that their gray hair garners less respect — and compensation — than they feel they deserve. Responses to such a complex social problem are varied. Any carefully drafted partnership agreement can give a firm license to oust a partner without cause if it acts in good faith. (Litigation on the question of what constitutes good faith is likely to increase in the coming years.) And since partners are not considered employees, they generally lack standing to bring claims of age discrimination under federal law. But when — and whether — a firm should take extreme action is a tougher question. There’s also a certain irony that in an era of longer life expectancy and increased productivity, lawyers are being urged out earlier. Even in a turbocharged business environment, experience should still count for something. The question is how to value and hold on to it while continuing to develop opportunities for younger partners. It may not seem surprising that our demographic survey found that firms with younger partners tend to be somewhat more profitable. But that finding doesn’t necessarily comport with the experience of all firms. “We have many lawyers in their fifties and sixties who are top performers,” says Mary Cranston, chair of Pillsbury Madison & Sutro. That’s impressive, especially since Pillsbury raised its productivity standards for partners last year from 1,825 billable hours to 1,875. (The firm requires a total annual commitment of 2,500 hours per partner.) But for any lawyer there’s a potential downside to such a brutal schedule, and the conventional wisdom is that older ones bear the brunt hardest. “The pace of practice has become very hectic, and lawyers are suffering burnout,” says a 57-year-old partner, explaining why his New York firm recently lowered its retirement age from 70 to 65. “The clients are getting younger and relate better to younger people.” Given these realities, many firms are choosing to avoid the dirty work of management by instituting mandatory retirement, lowering the retirement age, or providing financial incentives for early retirement. In recent years, for instance, New York’s Simpson Thacher & Bartlett added the option for early retirement at age 55 specifically to encourage people to move on. “It’s increasingly a young person’s game, and you want to have as much opportunity to bring people into the partnership as possible,” says former partner and executive committee member Robert Friedman. “It’s good for the firm to build more opportunity at the bottom.” With a clear end in sight, more lawyers will likely opt out early. “When you knew you would be practicing to 70 or beyond, you just did that,” says one partner at a New York firm. “When you know that you’re going to have to get out at 62, 65, 66, then people say, at those ages it will be too late to start a second career.” Still, there’s no easy one-size-fits-all retirement age or policy, especially since many older partners pull more than their weight (and are happy to do so) and because firms can face vastly different market pressures and competition. Even firms that weed out weaker, older partners despair over the loss of stronger performers, and many are finding that the lure of new-economy opportunities has created a kind of brain drain. “This whole graying notion actually doesn’t line up with my experience,” says Pillsbury’s Cranston. “I think it’s a bigger issue in New York than California. But that’s because California has been the land of opportunity for ten years. In general, we don’t lose lawyers to other firms. We lose them to clients.” Such opportunities are no longer limited to California. Simpson Thacher’s Friedman, who is 57, made a move last year that he probably would not have considered when he was younger: He left to join The Blackstone Group merchant bank as a senior managing director after 32 years at Simpson. “My largest client called me with an offer I couldn’t turn down,” he says. Firms have already begun to address ways to stem such losses. Akin, Gump, Strauss, Hauer & Feld, for instance, has made efforts to keep partners in their fifties from burning out. “We look for the early warning signs,” says chairman R. Bruce McLean, who is 53. “We have had good success turning burnout into afterburn by offering new challenges for these valued members of our firm.” For example, one 57-year-old partner based in Washington was asked to assume responsibility for the firm’s Brussels office in 1993. The assignment opened up new opportunities, and the partner, Jay Zeiler, transformed his general litigation practice into an international arbitration practice. “If I hadn’t gone to Europe and Brussels and changed the focus, I’m not sure I would have continued to chug along,” says Zeiler, who has now relocated back to Washington. Akin, Gump has also dealt head-on with a problem that plagues many firms: the unfunded retirement pension. A vestige of earlier days, when the tax laws restricted the advantages that partners could receive when saving for pensions, these plans rely on partners to pay the obligation out of the firm’s current income. Management consultants have been warning for some time about the looming obligations and intergenerational conflicts that can be caused by such plans as partnerships grow grayer. There is room for debate on the wisdom of such plans, and retirement consultant Mark Ross, managing director of Mark Ross & Co., Inc., argues in “To Fund … or Not To Fund” that it’s practically immoral for a firm not to pass on its goodwill through this vehicle. That position is disputed in a companion piece by C. Randel Lewis and William G. Johnston of Hildebrandt International, Inc. Akin, Gump took on the question more than a decade ago. Founded in 1945, the relatively young firm has had only four partners retire in its history (and two did so at the end of 1999). In the late 1980s, the two retired partners were already earning the maximum annual pension benefit of $50,000 (the total maximum was $250,000). Concerned about saddling the younger generation with an enormous obligation and troubled that the benefit no longer seemed as substantial as it had in the 1970s, the management committee voted to increase the benefit and fund the plan by requiring annual contributions of 1.75 percent of partner income. “By a very substantial margin, it was the most controversial thing we ever did,” says McLean. One of the most contentious issues was the proposal that partners receive credit for prior service to the firm when calculating their retirement benefit. “People on the management committee believed it was the right thing to do,” says McLean. However, some younger partners felt they would bear too much of the burden for payments to more senior partners. Nevertheless, the proposal passed by a majority. Shortly afterward, the firm fortuitously received a $10 million fee in a merger transaction. Rather than distribute it as ordinary income, the money was used to fund the past service liability. Implementing a mandatory retirement age of 67 in 1997 was only slightly less controversial. At the time, 60 percent of the 230 partners were between ages 44 and 50. “We looked down the road and said, ‘If we don’t deal with this now … it could be an issue that will tear the firm apart,’” says McLean. “It was our belief that it would be unfair to saddle future leaders of our firm with the responsibility to confront us boomers with the truth that it was ‘time to hang ‘em up.’” Some partners saw mandatory retirement as a management cop-out and objected to setting a specific age that would force some productive people to retire before they were ready. In the end, the management committee retained the discretion to extend the retirement age under extraordinary circumstances. Of course, the approach that each firm takes to retirement and related issues will reflect its own culture. At New York’s Debevoise & Plimpton (founded in 1931), for instance, there’s a sense that “people generally do know when it’s time to go,” says partner Bruce Haims, 59, head of the firm’s retirement committee. (Just in case they don’t, the mandatory retirement age is 67.) There’s also a sense that partners deserve to be taken care of, and Debevoise is one of a few firms where the unfunded pension is actually a point of pride. Younger firms like Skadden (founded in 1948) and Wilson Sonsini (founded in 1961) function more in the here and now. Neither has ever had an unfunded plan. American law firms are really just emulating what’s already standard procedure in other professions — and in law firms on the other side of the Atlantic. For years, investment bankers have been retiring in their forties and fifties and moving on to other careers. Of course, they have always made more money than lawyers. A lot more. Likewise, the career trajectory at Big Five firms has always been shorter. For instance, the average Deloitte & Touche partner retires at 58 or 59, while mandatory retirement is age 62, says partner Joseph Rosalie. Deloitte partners who have worked at the firm for ten years become fully vested at age 50. The Big Five also typically set no limits on the work a partner can do after retirement. Though many states (but not California) have found noncompete clauses unenforceable, many law firms still try to restrict the benefits a partner can receive if he or she goes to work for a competitor after leaving. Firms that want to encourage people to move on will have to loosen that noose. The restrictions reflect an inherent selfishness, argues Hildebrandt’s Lewis. “Firms say, ‘We don’t want them to compete. We want all their business and want them out of the way.’” Will there be an upside to the coming surge of aging lawyers? Yes, as Marc Freedman asserts in his book, “Prime Time: How Baby Boomers Will Revolutionize Retirement and Transform America,” older folks may be our nation’s only growing natural resource. Contributing editor Galanter proposes that this cohort can help fill in gaps in the public service arena [see "Second Chances,"]. They are also a potential commodity in the corporate world. Some firms, like New York’s Hughes Hubbard, have already begun using retired partners as consultants or offering more flexibility to keep partners from quitting altogether. “We’re all desperate for resources,” says chair Candace Beinecke. “It’s almost like women years ago. There’s this talented pool of people out there who are underutilized.” What of the future, then? Who will be attracted to a profession that requires so much of its members? While Suzanne Garment eloquently explicates the reasons why she chose to enter law school at age 50, many in the trenches do not echo her sentiments. “I did not encourage my kids to go into the law,” says ex-Pillsbury partner Hoehler. “It is a good group of people, for the most part, and [it is] mentally challenging. But the brutal hours that are required day after day and the clocking of every minute wear a person down and change them. … When we of my age started in this occupation, we did not think that we would be working as hard as we are at the age that we are. But the whole legal world has changed.” See Related Chart: The Roadmap See Related Chart: The Average Partnership

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.