NEW YORK, March 19 (Reuters Breakingviews) - The model of
guaranteeing investment bankers big bonuses is failing legal
eagles, too. Dewey & LeBoeuf lured rainmakers with promised
payouts, echoing a structure common on Wall Street. Resulting
pay cuts for less celebrated partners at the New York law firm
have helped fuel an exodus. Dewey's struggle to regain
equilibrium is a cautionary tale about getting swept up in a
culture of financial stardom.
In the world of corporate law, Dewey Ballantine used to
denote royalty. Started in 1909, it boasted the likes of ex-New
York Governor Thomas Dewey (he who never defeated Truman) among
its ranks. After a 2007 merger with insurance-law powerhouse
LeBoeuf, Lamb, Greene & MacRae, the future appeared bright.
Things look a bit dimmer now that 31 partners - including
major corporate finance practice leaders - have fled this year.
More departures are expected. Lawyer and staff layoffs of at
least 5 percent are in the offing. And tens of millions of
dollars in partner compensation has been deferred.
Part of the problem is a shaky economy. As at other firms,
Dewey's profits have been essentially flat since the 2008
financial collapse, though 2011 revenue crept up about 2
percent, to roughly $935 million. But management also deserves
Before the merger, Dewey Ballantine's head said managing was
not his "passion." The current chairman seems far more engaged,
but the firm's strategy of super-charging growth with
high-profile partners poached from other firms is raising
Last year, Dewey hired 37 partners from outside while losing
14. It also continued the practice of committing to certain
multi-million-dollar packages for more than one year. But flat
profits prompted pay cuts and IOUs, leaving a partner
compensation structure that ranged from about $500,000 a year to
as much as $8 million.
Grumbling was inevitable, as banks should know too well.
When a $30 million package propelled UBS's Stephen Trauber to
Citigroup in 2010, for instance, it triggered alarms at his new
home. And guaranteed bonuses continue to annoy regulators.
Dewey insists its finances are solid and that partner
departures were expected and even encouraged. Perhaps. But with
the demise of firms like Howrey and Brobeck Phleger & Harrison
still fresh on the legal community's mind, the last thing the
profession needs is another venerable institution to
-- Twelve more partners left New York-based law firm Dewey &
LeBoeuf on March 16, increasing to 31 the total that have exited
the firm since the start of the year. The latest exodus involved
attorneys with Dewey's transactional and regulatory insurance
group. They joined another New York-based firm, Willkie Farr &
-- Dewey & LeBoeuf was created in 2007 through the merger of
century-old Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae.
It has about 1,000 lawyers, roughly 300 of whom are partners, in
25 offices worldwide.
(Reporting by Reynolds Holding, a Reuters Breakingviews
columnist. The opinions expressed are his own.)
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