The Economic Benefits of Secrecy

Josh Wright —  19 September 2009

The ABA Journal (HT: Steve Salop) has an interesting item suggesting that Jones Day’s policy of keeping compensation secret might be paying dividends in a tough economic climate:

Jones Day’s secrecy surrounding compensation may be aiding its rapid expansion in the San Francisco Bay area.  Jones Day has grown from a couple of dozen Bay Area lawyers in 2003 to 137 lawyers in its San Francisco and Palo Alto offices, the Recorder (sub. req.) reports. Observers say the law firm’s closed compensation system is helping its efforts to hire quality laterals because partners don’t know what the new hires are paid and can’t complain.  Often laterals are paid a premium that is higher than the average partner salary, the story says. Secrecy aids hiring and collegiality.

The article notes that the business card for Joe Sims, the lawyer heading up the West Coast expansion, doesn’t indicate his title or business area. His explanation: “We don’t do titles here.”

The story concludes that there are a lot of things Jones Day doesn’t do. “It doesn’t tell its partners what other partners make, it doesn’t issue profit figures, it doesn’t pay bonuses, it doesn’t let partners vote on who will head the firm, it hasn’t conducted mass layoffs, and it doesn’t pay associates in lockstep.”  The lack of mass layoffs has also helped the law firm grow, since about half the firm’s headcount in the San Francisco area came from hiring new law school graduates, many of whom remain at the law firm.  Partners at Jones Day are paid based on contribution, leadership, collegiality and reputation—not client originations, according to Robert Mittelstaedt, the partner in charge of the San Francisco office.

“There have been a handful of people that have said I don’t want to go to a place where I’m not paid in bonuses if I bring in more business,” Mittelstaedt told the Recorder. “When people have that reaction, I just tell them Jones Day is not for them.”