The Key To Wachtell’s Success? How They Pay Their Partners (2024)

The Biglaw firm of Wachtell, Lipton, Rosen & Katz has quite the reputation as a prestigious institution, even if they do things a little differently. Within the world of Biglaw, the firm is relatively young (founded in 1965) and fairly small (260 attorneys), but they’re still regarded as one of the very best law firms — and one with a reputation as the hardest firm to get a job at.

Big Law Business has put together a close look at what makes Wachtell well, Wachtell. Key to the firm’s success has been the influence of name partner, Martin Lipton. Sure, he’s a well-respected legal mind — he’s the legal mind behind using poison pills to stop hostile takeovers — but it’s his management philosophy that gets the most attention in this piece.

The firm is styled as a “true partnership” with no written partnership agreement, but only “a handshake between friends.” (Which, honestly, sounds like something the firm would advise a client against, but that’s neither here nor there.) But what does, at least informally, govern the firm is a list of 35 management principles that Lipton came up with and is displayed in his office. These principles are why the firm doesn’t do any marketing, why expansion of the firm’s headcount has been limited, and why the firm only has a single office.

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But the Lipton principle that gets the most credit for making Wachtell so unique is the way it pays its partners. No complex formula where origination credits are battled over between partners, but a lockstep compensation system that is solely tied to seniority:

Perhaps most important is how the firm pays its partners through what’s known as a “lockstep” system. Compensation is tied to firm seniority, rather than hours billed or business brought in.

These principles—and the culture they’ve helped create, where attorneys meet on Tuesdays for lunch to stay close—have been held up by Wachtell partners as “genius,” a playbook worthy of a Harvard Business School case study offering broader lessons for corporate America.

They’ve also helped make Wachtell something of an outlier. It’s the only major law firm where, at least to Lipton’s knowledge, not one partner has joined another law firm for a bigger paycheck.

Senior partners only make about three times what junior partners make, which is a lot more equitable than at some other firms. You might think that’d make younger partners with profitable business books ripe to be picked off by competitor firms, but so far no one has left the partnership over money. And Lipton thinks he knows why:

“Money isn’t the last thing in their lives,” responds Lipton, who believes in the old-school ethos that the law is a profession, not a business, and that money should be viewed as a byproduct of the work, not the chief reason for it.

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And it sure doesn’t hurt that business at Wachtell is doing really well.

Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email herwith any tips, questions, or comments and follow her on Twitter (@Kathryn1).