A famous former (and now late) leader of the US House of Representatives, the classic Boston pol Tip O’Neill, supposedly remarked that “all politics is local.” To that I would add MacEwen’s corollary, that “all rivalries are local.”
In many ways, the leading candidate for most intense local rivalry in BigLaw is between London’s four Magic Circle firms and New York’s white shoe elite. Both groups of firms operate at the top of the food chain, attracting the top talent, working for the most sophisticated and demanding global clients, and most are able to claim deep historic ties to “too big to fail” financial institutions.
There are also noteworthy differences between the two groups:
- London-based firms long ago got religion about expanding outside their home City, often following clients who led the way beyond the confines of the Square Mile—notably to Hong Kong and other economically significant precincts of the Empire.
- New York firms, by contrast, have until very recently housed the overwhelming majority of their lawyers in Manhattan, out of a combination of calculation, self-satisfied comfort, and inertia, seeing little reason to look elsewhere because the large and deep domestic US capital markets ran exclusively through New York, because a meaningful presence in any other city (London excepted, which we’ll come to) would dilute financial performance, and frankly (I believe) because the United States’ geographically and historically unique position of privileged provincialism, isolated from everyone else by two great oceans, undercut any urgent commercial or cultural need to look further afield.
- To call attention to the self-evident, most London firms have much older roots, some able to boast that they’re “older than the US,” as one cheeky non-Magic Circle London firm does on its website, in those very words. You might think this is a banal statement of the blindingly obvious, but heritage has consequences and deeply, even subconsciously, informs self-image. So, of course, conversely, does relative youth. Cf. New York.
- Famously, the totemic compensation systems are different, London lockstep vs. New York’s eat-what-you-kill, or, in less judgmental terms, performance-based or meritocratic system. Now this is not the place for a discussion of those philosophically divergent approaches to compensation—and indeed, our colleague Richard Rapp has a probing monograph on this very topic in the works—but what I want to emphasize today is that this divide means less and is narrower with the firms we’re about to discus than with almost any other set of US and UK firms.
Which brings us to the topic at hand: Just how have the Magic Circle and New York’s white shoe elite performed over the past several years?
For decades, a legendary New York area sportscaster named Warner Wolf would segue from introduction to specific commentary by declaring, “Let’s go to the videotape!” This being Adam Smith, Esq., let’s go to the data.
And one last note before we do: The data that follows, inevitably, is derived from the best available public sources, but on the right side of the Atlantic that means firms filing public records under the Companies Act and on the left side it means firms reporting to The American Lawyer on the honor system.
By nature and temperament I tend to take a very charitable view of others’ scruples, at least until given convincing evidence to believe otherwise, but before we plunge ahead it’s worth noting H.L. Mencken’s observation about the temptation of indulging in favorable shading of the truth in the absence of consequences: “Conscience is the inner voice that warns us somebody may be looking.”
Using publicly reported data for the years 2008—2013, I compiled or derived these metrics:
- Total revenue
- Total number of lawyers
- Total number of equity partners
- Equity partners as a percentage of all lawyers
- Revenue per lawyer
- Total profits
- and profit margin.
The firms I selected for the Magic Circle were, uncontroversially:
- Allen & Overy
- Clifford Chance
- Freshfields, and
I excluded Slaughters as a special case, and anyone else as a poseur.
For New York, I selected:
- Cleary Gottlieb
- Davis Polk
- Paul Weiss
- Simpson Thacher
- Sullivan & Cromwell, and
- Weil Gotshal
I excluded Cravath and Wachtell as special cases, Skadden (and for that matter, Kirkland and Ltham) as having sufficiently different historical roots, geographic footprints, and business models, as to make them categorically distinct, and I excluded other worthy New York based firms as falling just outside the fuzzy line of the inner-most circle of the highest and most impeccable boardroom pedigree.
Inarguably, determining the “in’s” and the “out’s” of the New York elite, when one is called upon to draw bright, unforgiving lines, can lead to extended debate. The world of top London firms can be envisioned as composed of circles embracing firms with strong commonalities with relatively little overlap. New York is a more chaotic Venn diagram. But I think the list I’ve come up with will do.
The ground rules are that I display each dataset as an aggregate for New York and for London over the years 2008—2013. Totals (revenue, profits) are arithmetic sums and “per XX” series (RPL, PPP) are averages of the total pertinent-city numerator over the total pertinent-city denominator. All currency figures are in US $$.
Let’s start, where else, with total revenue (click any of these charts to open in a new window):