New Legal Profession Blog
Welcome to the blogosphere to the Legal Profession Blog, by Jeff Lipshaw (currently visiting at Tulane), Michael Frisch (Georgetown), and Alan Childress (GWU, currently visiting at Tulane).
[M]y experience with law firms as partner and customer is that they may well be perfect laboratories to test the predictions of competing economic theories. My casual experience is that nothing will tell you more about your upcoming relationship than knowing how the firm’s internal compensation system works, not only as a matter of partnership or LLC operating agreement, but as a matter of culture. Here’s an example of contractarianism gone wild. Some years ago, when I was leaving AlliedSignal, I was approached by a smallish suburban Detroit law firm whose compensation system worked like this. As the “rainmaking” partner for a piece of work, you controlled the profits. If you needed tax work on the deal, you had to go to one of the tax partners and negotiate a split. (It’s entirely possible that the system worked for relatively independent trial lawyers; I couldn’t imagine trying to rope in everyone I needed for a deal.) The next time I encountered a system like this was negotiating a “preferred global law firm” deal with a major U.S.-based international firm. I was told that if the U.S. office agreed to too much of a discount, it would not be able to entice its sister offices to participate!
Law students, too, would profit (pun intended) by putting some effort into studying the economic models built into their prospective employers. More below the jump.