James Woolery is on the move again. We’ve never met, but I’m beginning to feel as if I know the guy.
I first covered Woolery in a June 3, 2010, post about a policy change at Cravath, Swaine & Moore. The Wall Street Journal had featured the then-41-year-old Cravath partner in an article about the firm’s plan to allow lawyers in their 30s and 40s to "make a name for themselves" by taking the lead on client deals. Historically, the Journal reported, Cravath had reserved that role for partners in their 50s.
Six months later, I wrote about Woolery when he left Cravath to become co-head of JP Morgan Chase’s North American mergers and acquisitions group. He told The New York Times at the time that he had cultivated a focus on business development and the Chase opportunity would allow him to build on those skills. So much for practicing law.
Now, two years after joining Chase, Woolery has become Cadwalader, Wickersham & Taft’s first firmwide deputy chair—a new position apparently created specially for this prominent lateral hire. In covering Woolery’s latest move, the Journal suggested it “is a big personal bet for Mr. Woolery. He is jumping back to the legal industry when it is still struggling with a shortage of work, and he is leaving J.P.Morgan just as mergers are showing new signs of life.”
Others have speculated on the reasons for Woolery’s various moves. I’m more interested in the contrast between where he started (Cravath) and where he has now ended (Cadwalader).
Whatever else people may think of Cravath, it has an unrivaled reputation for attracting first-rate attorneys. It is also a partnership in the truest sense of that concept: A single tier with a lock-step compensation system that resists an undue emphasis on short-term thinking. The Cravath model promotes longer-run values, such as institutional stability.
For example, although a lateral hiring frenzy pervades big law, it hasn’t really touched Cravath. The firm focuses on developing talent internally. Its attorneys work hard, run a challenging gauntlet to equity partnership, and reap rich rewards for success.
In May 2007, an American Lawyer interviewer asked Cravath’s then-presiding partner Evan Chesler whether partners would stick around if the firm made less money. "I don’t know the answer to that," he said. "I think there is more glue than just money."
Cravath’s ethos wouldn’t appeal to attorneys drawn to Cadwalader’s culture. In the mid-1990s, Cadwalader began moving aggressively toward what its new chairman Robert O. Link Jr. called a meritocracy and others call "eat-what-you-kill."
In a February 2007 interview with The American Lawyer [PDF], Link expressed an attitude about firm culture that differed dramatically from Chesler’s. "Everyone should wake up in the morning and feel a little vulnerable," he said.
Link meant it. In 1995, the 268-lawyer Cadwalader firm’s two-tier partnership had 76 equity partners, giving it a leverage ratio of three and a half. By 2005, the firm had nearly doubled in size, but had only 75 equity partners. Its leverage ratio of seven far exceeded that of all other Am Law 100 firms.
Cadwalader’s asset-backed structured finance practice fueled much of its growth. By 2007, it had 645 lawyers and a stunning leverage ratio of eight and a half. But when the residential housing market cratered and took asset-back structured finance legal work with it, the firm’s fortunes slid badly.
By the end of 2012, Cadwalader had 435 lawyers—down more than 200 from five years earlier. Only 55 of those were equity partners—down 20 from 2007. The good news for the survivors was that by 2012, average equity partner profits had recovered almost completely to their 2007 peak of $2.7 million.
Differences That Transcend Metrics
As Cadwalader became smaller, Cravath maintained average partner profits ranging from $2.5 to $3.2 million, a leverage ratio of approximately four, and moderate growth from 412 to 476 attorneys. Even more to the point, it’s hard to imagine any circumstance short of dissolution that would cause Cravath to shed almost a third of its equity partners, as Cadwalader did from 2007 to 2012.
In May 2010, Woolery told the Journal, "This is not your grandfather’s Cravath." It’s not clear what that characterization of his former firm means or if it is even correct, but grandchildren sometimes underestimate the value of a grandfather’s gifts. And grandchildren sometimes grow up to be grandparents themselves.
Steven J. Harper is an adjunct professor at Northwestern University and author of the forthcoming The Lawyer Bubble: A Profession in Crisis (Basic Books, April 2, 2013). He retired as a partner at Kirkland & Ellis in 2008, after 30 years in private practice. His blog about the legal profession, The Belly of the Beast, can be found at http://thebellyofthebeast.wordpress.com/. A version of the column above was first published on The Belly of the Beast.