Center for Law and Economic Studies
Center for Contract and Economic Organization
Large corporate law firms seem to be in a state of extraordinary flux. Success and failure are both on the rise. Large firms appear to supply a substantial and growing proportion of the legal services consumed by American business enterprises1 and to hire a significant fraction of the graduating classes of elite American law schools.2 Moreover, the last twenty years have witnessed a remarkable expansion in both the number of large firms and the absolute size of the biggest.3 But accompanying this striking success, there are also signs of serious institutional instability. During the last few years, several previously successful large firms have disintegrated and collapsed.4 Every issue of the legal press now carries stories of individual partners leaving one firm to join another, groups of partners splitting off to establish their own firms, and internal squabbles over the division of profits.5 Traditions like seniority-based divisions of partnership income6 and the "up or out" policy, under which associates either are promoted to partner or fired,7 are being challenged as inefficient. Stable organizational life within many firms seems to be a nostalgic memory of simpler times.8
Ronald J. Gilson & Robert H. Mnookin,
Sharing Among the Human Capitalists: An Economic Inquiry into the Corporate Law Firm and How Partners Split Profits,
Stan. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/897