The Power of One

The Power of One
Vivia Chen The American Lawyer

Big Law is not known as a welcoming place for women partners. But a close look at the latest numbers reveals that women are actually making gains—sometimes substantial gains—at many of the über-elite Am Law 200 firms. In the race for equity partnership—the coveted prize of Big Law—female lawyers at firms with a one-tier partnership are outpacing their sisters at firms with two-tier partnerships. The difference is only a few percentage points, but it is striking: In the Am Law 200 pool, women at single-tier firms (where all partners have equity) currently hold 17.9 percent of the partnership; at two-tier firms—composed of equity and nonequity/income partners—women constitute just 14.6 percent of the equity partners, but 24.6 percent of nonequity partners. [For a chart showing the ratio of women partners at one-tier Am Law 200 firms, see "One Singular Sensation."]

The numbers tell the story: Of the 30 one-tier firms (out of 31) on the 2012 Am Law 200 list that provided a gender breakdown, 22 boast female equity partnership rates above 15 percent. (The American Lawyer defines equity partners as "those who receive no more than half of their compensation on a fixed-income basis.") Those 22 firms include some of the most profitable, bluest of the blue chips, in the industry, such as Wilmer Cutler Pickering Hale and Dorr (23.2 percent women equity partners); Ropes & Gray (20.7 percent); Davis Polk & Wardwell (20.3 percent); Arnold & Porter (19.5 percent); and Munger, Tolles & Olson (19 percent).

What's more, several one-tier Wall Street firms have made dramatic jumps in the percentage of female equity partners since 2003, when we first reported on women at the nation's most profitable firms: Cravath, Swaine & Moore went from 8.9 to 15.5 percent; Sullivan & Cromwell, from 9.9 to 18 percent; Simpson Thacher & Bartlett, from 12.2 to 19.4 percent; Paul, Weiss, Rifkind, Wharton & Garrison, from 13.2 to 20.6 percent; and Willkie Farr & Gallagher, from 13.8 to 20.6 percent.

Why are women so successful at these super-selective firms? We asked about a dozen women partners at one- and two-tier firms, as well as managing partners and experts on women in the legal profession, for their thoughts. Theories abound. Among them: Women thrive in the more collegial single-tier partnerships because they tend to be less cutthroat than two-tier firms. A related issue is that the requirements to make partner at one-tier firms are different: Bringing in business, a criterion that has historically favored men, is not the sine qua non for admission to equity partnership at one-tier firms, where homegrown talent who have proven their worth over the years (rather than laterals with books of business) get promoted. At two-tier firms, on the other hand, there's more internal competition for clients and status; the result is that women can more easily get "pushed" to the nonequity ranks or opt out of the running for equity partner. "I don't think one-tiers are more open-minded," says Patricia Gillette, a partner at Orrick, Herrington & Sutcliffe, a two-tier firm. "But in one-tier, you know exactly what you need to do to make it."

Moreover, the advent of other "alternative" career paths (such as staff attorney and counsel) means that senior lawyers—often women—are sidetracked. Barbara Flom, the author of the National Association of Women Lawyers Foundation 2012 report on women in law firms, says, "As law firms have become more complex, many women—especially women with 10 or more years of practice—have become clustered in these 'other' categories rather than ascending to the ranks of equity partners." According to the report, 70 percent of all staff lawyer positions are now filled by women, a 15 percent increase in just the last year. Though about half of staff lawyers are relatively young (in their first decade of practice), NAWL also found that almost all senior staff lawyers are women. Moreover, NAWL notes that men tend to enter counsel positions when they are nearing retirement, while women go into them at a much earlier stage.

Often, though, women are the ones who are choosing these nonequity positions. Given an array of alternatives, it's tempting for women to choose what appears to be the easier route, says Laurel Bellow, president of The American Bar Association. "Some women feel they can't comply with the requirements of equity partnership. It's opting out before they opt in. It's troubling because they don't see the future . . . they are choosing the short term."

In the short-term view, these staff, counsel, or nonequity positions seem to offer less pressure. But in the long term, it means that women are probably eliminating the possibility that they will ever become equity partners. The reason: It's a huge challenge for women to develop enough business to get out of the income partner rut. "If you build enough of a business and your area is hot, you might be able to move [up to equity]," says Ellen Ostrow, a business development consultant based in Washington, D.C. "But it's tougher for women to build business relationships." (NAWL finds that business development is a huge challenge for women, and that women partners are often credited with a smaller median book of business than men.) Plus, non­equity partners have scant time to develop business because they have to keep billing. "When you're promoted to equity, you're not required to bill so many hours; the assumption is that you will use the time to build business. But for nonequity partners, the billing requirement doesn't go down. They're still expected to bill 1,800–2,000 hours," says Ostrow.

As well, it can be more challenging to get equity at a two-tier firm. "Multiple-tier firms affect women disproportionately because there is internal angst and infighting about business development and compensation," says Elizabeth Tursi, chair of the Women in Law Empowerment Forum. "Women are less likely to fight for themselves against 'the wild bunch' of men who are vying for equity status."

Indeed, not having to hustle for business nearly as much as their counterparts in two-tier firms is a big advantage that women in one-tier firms have. Wilmer partner Molly Boast says there's "more stability in the client base" of a one-tier firm because there are more long-term institutional clients. Boast, who was also a partner at one-tier Debevoise & Plimpton before she entered government service (she served as Federal Trade Commission director during the Clinton administration and, later, deputy assistant attorney general under President Barack Obama), says she feels more comfortable with the culture at one-tier firms. "Debevoise was completely lockstep, so there's no point in jockeying for clients," she says. "And here [at Wilmer], there's a well-developed consensus that some people with substantial business might be paid less [than what they might make elsewhere], but everyone is comfortable with that."

Davis Polk managing partner Thomas Reid says a one-tier partnership system also helps decrease unconscious gender bias. "Our all-equity, pure lockstep system is absolute. Each partner is 'all in' or not in at all. So no room for gender bias," Reid explains. He adds that two-tier, nonlockstep firms "are susceptible to distinctions without differences at best and subtle discrimination at worst."

Those factors also make old-fashioned, one-tier firms generally more pleasant places to practice. The culture is more intact at a one-tier firm, says Boast, because "there's not a lot of lateral hiring, while at two-tiers there are more transient books of business." Drinker Biddle & Reath partner Mercedes Meyer says women have to be willing to fight for their turf in a two-tier firm: "They have two hurdles—one [to attain] nonequity, then equity" partnership. The problem, she adds, is that "women get frustrated" in a two-tier system because they're not used to pressing their case aggressively.

Despite the considerable virtues of collegiality and fairness, though, the reality is that one-tier firms, particularly lockstep ones, are becoming increasingly less common. Over the years, many have transformed into two-tier partnerships. In 2001, for instance, there were 50 firms in The Am Law 200 with single-tier partnerships. By 2011, that number had dropped to 31. "As firms have grown, they've gotten more stratified," says NAWL's Flom. "It used to be that a partner was a partner"—meaning that almost everyone was an equity partner. Now, though clients might not know which partners have equity, nonequity partners have far less clout and "are viewed differently within law firms," adds the ABA's Bellows.

Some firms believe that having large numbers of nonequity partners is critical to keeping the lid on their costs. One firm that champions this model is K&L Gates, where nonequity partners far outnumber those with equity (643 nonequity vs. 264 equity). The firm also has a very low rate of women equity partners—just 8.9 percent—compared to 22.2 percent in its nonequity ranks. K&L Gates chair Peter Kalis, however, disputes the notion that having a big pool of nonequity partners is detrimental to women's progress. He also disputes our definition of equity partners, contending that under the firm's own definition it has 15 percent female equity partners. (Kalis does not believe that equity partners should be limited only to those who get no more than half of their pay on a fixed-income basis; he says that his firm considers partners to be equity if they have voting rights and get K-1 tax statements.) Kalis says that being a nonequity partner doesn't preclude anyone from moving into the equity ranks, and is a "respected career for men and women," in which "people are nicely compensated." To denigrate the value of being a nonequity partner, he says, is "retro Wall Street thinking." He adds, however, that women will gain traction with time: "I do expect that the number [of women equity partners] will go up."

The women we talked to were less sanguine. "It's an easy way out, to make women nonequity partners," says Simpson Thacher partner Marissa Wesely about firms that go the two-tier route. Having a business model like K&L Gates with its large pool of nonequity partners might please clients, says Ostrow, because "that way, clients don't have to pay as much." But the collateral damage, she says, "is that you've created more pink ghettos." Women will be better off going to a one-tier firm, especially if making equity partner is their goal, she says.

For most women—and men—going to an elite, one-tier firm, is not a real option. One-tiers make up only 16 percent of The Am Law 200 these days; plus, that track is reserved for those with outstanding academic credentials. But even for those select few, there will probably be fewer one-tier firms in the future, especially if firms continue to grow and form alliances or mergers with firms around the world that have different levels of profitability and partnership structures.

So what happens if some of the remaining one-tier firms switch to a two-tier structure in the future? The number of female equity partners will be affected—and not in a positive way, several women warn. "The shift means that the number of women [equity partners] will probably stall," says University of California, Hastings Law School professor Joan Williams. "I am not optimistic." But until that happens, the women at the one-tier firms will continue to lead the way for their two-tier sisters.